UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
* Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly period ended September 30, 1998
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the transition period to
COMMISSION FILE NUMBER 0-23383
OMNI ENERGY SERVICES CORP.
(Exact name of registrant as specified in its charter)
LOUISIANA 72-1395273
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4500 N.E. EVANGELINE THRUWAY 70520
CARENCRO, LOUISIANA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (318) 896-6664
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes * No
As of November 13, 1998 there were 15,948,627 shares of the Registrant's
common stock, $0.01 par value per share, outstanding.
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1998 and December
31, 1997....................................................... 1
Consolidated Statements of Income for the three and nine months
ended September 30, 1998
and 1997.................................................. 3
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998
and 1997 ................................................. 4
Notes to Financial Statements ................................. 5
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 9
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K ........................... 14
Signatures.................................................................S-1
Exhibit Index..............................................................E-1
<PAGE>
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Thousands of dollars)
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,324 $ 8,723
Accounts receivable, net 18,348 11,958
Parts and supplies inventory 7,382 2,988
Deferred tax asset 212 212
Prepaid expenses and other 2,496 1,753
-------- --------
Total current assets 30,762 25,634
======== ========
PROPERTY AND EQUIPMENT:
Land 359 359
Building and improvements 6,212 3,949
Drilling, field and support equipment 28,693 21,940
Shop equipment 712 408
Office equipment 1,239 582
Aircraft 10,670 9,266
Vehicles 4,045 3,448
Construction in progress 1,608 800
-------- --------
53,538 40,752
Less: accumulated depreciation 5,467 2,909
-------- --------
Total property and equipment 48,071 37,843
-------- --------
OTHER ASSETS:
Goodwill, net 15,115 10,680
Other 937 756
Total other assets 16,052 11,436
--------- ----------
Total assets $ 94,885 $ 74,913
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Thousands of dollars)
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND EQUITY September 30, December 31,
1998 1997
------------- ------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 5,094 $ 5,713
Accounts payable 7,776 5,998
Accrued expenses 551 2,409
Due to joint venture 4,414 ---
----------- -----------
Total current liabilities 16,755 14,120
----------- -----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 16,426 14,558
Line of credit 10,000 ---
Minority interest 636 ---
Deferred taxes 570 1,650
----------- -----------
Total long-term liabilities 28,076 16,208
----------- -----------
MINORITY INTEREST 636 ---
----------- -----------
EQUITY:
Common Stock, $.01 par value, 45,000,000 159 157
shares authorized; 15,948,627 and 15,726,282
issued and outstanding 46,826 44,038
Additional paid-in capital
Retained earnings 2,487 390
Cumulative translation adjustment (54) ---
----------- -----------
Total equity 49,418 44,585
----------- -----------
Total liabilities and equity $ 94,885 $ 74,913
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
consolidated statements.
<PAGE>
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
-------- ---------- ------- -----------
Operating revenue $ 19,905 $ 16,976 $ 62,483 $ 33,989
Operating expenses 17,016 12,515 45,374 25,017
--------- ---------- -------- ----------
Gross profit 2,889 4,461 17,109 8,972
General and administrative expense $ 4,378 1,816 9,214 3,090
Asset impairment and other charges 3,379 --- 3,379 ---
----------- ---------- -------- ---------
Operating income (loss) (4,868) 2,645 4,516 5,882
Interest expense 474 604 1,211 1,226
Other income (expense) (81) (4) 200 12
----------- ----------- ------- ---------
555 608 1,011 1,214
----------- ----------- ------- ---------
Income (loss) before taxes (5,423) 2,037 3,505 4,668
Income tax expense (benefit) (2,180) --- 1,391 ---
----------- ---------- ------ ---------
Net income (loss) including
minority interest $ (3,243) $ 2,037 $ 2,114 $ 4,668
Minority interest 17 --- 17 ---
------------ ----------- ----- ---------
Net income (loss) $ (3,260) $ 2,037 $ 2,097 $ 4,668
Pro forma tax provision ============ 815 ===== 1,867
----------- ---------
Pro forma net income $ 1,222 $ 2,801
=========== =====
Net income per share:
Basic $ (0.20) $ 0.17 $ 0.13 $ 0.42
Diluted $ (0.20) $ 0.17 $ 0.13 $ 0.42
Pro forma income per share:
Basic $ 0.10 $ 0.25
Diluted(a) $ 0.09 $ 0.21
Weighted average shares outstanding:
Basic 15,946 11,789 15,815 11,073
Diluted 15,946 11,907 16,019 11,126
</TABLE>
(a)Gives effect to the payment of dividends on the outstanding preferred units
of OMNI Geophysical, L.L.C. of approximately $137,500 and $412,500,
respectively, for the three and nine month periods ended September 30, 1997.
The accompanying notes are an integral part of these financial consolidated
statements.
<PAGE>
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
<S> <C> <C>
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,097 $ 4,668
Adjustments to reconcile net income to net cash provided by (used
in) operating activities-
Depreciation 3,274 1,509
Amortization 498 130
Loss on fixed asset disposition 103 28
Deferred compensation 108 48
Provision for bad debts 1,061 150
Asset impairment and other charges 3,379 ---
Changes in operating assets and liabilities-
Decrease (increase) in assets-
Receivables-
Trade (4,421) (5,985)
Other 622 (190)
Inventory (3,329) (1,426)
Prepaid expenses 523 (271)
Other (2,949) (705)
Increase (decrease) in liabilities-
Accounts payable (1,665) 5,025
Unearned revenue (638) ---
Due to affiliates and stockholders/members --- (29)
------- ------
Net cash provided by (used in) operating activities (1,337) 2,952
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets 2,984 543
Purchase of fixed assets (16,482) (10,142)
Acquisitions, net of cash received (2,856) (1,948)
-------- -------
Net cash used in investing activities (16,354) (11,547)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 7,883 23,209
Principal payments on long-term debt (8,236) (8,976)
Net borrowings on line of credit 10,000 5,884
Capital contributions 1,650 1,078
Distributions to members --- (5,321)
Retirement of preferred units --- (5,000)
------- -------
Net cash provided by financing activities 11,297 10,874
------- ------
Effect of exchange rate changes in cash (5) ---
NET INCREASE (DECREASE) IN CASH (6,399) 2,279
CASH, at beginning of period 8,723 39
------- ------
CASH, at end of period $ 2,324 $ 2,318
======= ======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID FOR INTEREST $ 1,258 $ 1,131
======= ======
CASH PAID FOR TAXES $ 2,270 $ ---
======= ======
</TABLE>
The accompanying notes are an integral part of these financial consolidated
statements.
<PAGE>
OMNI ENERGY SERVICES CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements have been prepared without audit as permitted by the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to such rules and
regulations. However, the management of OMNI Energy Services Corp. (the
"Company") believes that this information is fairly presented. These unaudited
condensed consolidated financial statements and notes thereto should be read in
conjunction with the financial statements contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Certain reclassifications have been made to the prior year's financial
statements in order to conform with the classifications adopted for reporting
in fiscal 1998.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of only normal,
recurring adjustments, necessary to fairly present the financial results for
the interim periods presented.
IMPAIRMENT OF LONG-LIVED ASSETS
During 1995, the Company adopted the Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." Under the provisions of this
statement, the Company has evaluated its long-lived assets for financial
impairment, and will continue to evaluate them as events or changes in
circumstances indicate that the carrying amount of such assets may not be fully
recoverable.
The Company evaluates the recoverability of long-lived assets not held for sale
by measuring the carrying amount of the assets against the estimated
undiscounted future cash flows associated with them. At the time such
evaluations indicate that the future undiscounted cash flows of certain long-
lived assets are not sufficient to cover the carrying value of such assets, the
assets are adjusted to their fair values. Based on these evaluations, there
have been no adjustments to the carrying value of long-lived assets in previous
periods.
During the third quarter of 1998, the Company evaluated the recoverability of
certain long-lived assets by comparing the assets carrying amounts with their
fair value less cost to sell. In September 1998, the Company recorded a charge
of $3.1 million as a result of its decision to write-down and write-off these
assets (see Note 5).
SEASONALITY AND WEATHER RISKS
Results of operations for interim periods are not necessarily indicative of the
operating results that may be expected for the full fiscal year. The Company's
operations are subject to seasonal variations in weather conditions and
daylight hours. Since the Company's activities take place outdoors, on average,
fewer hours are worked per day and fewer holes are generally drilled or
surveyed per day in winter months than in summer months, due to an increase in
rainy, foggy, and cold conditions and a decrease in daylight hours.
Furthermore, demand for seismic data acquisition activity by oil and gas
companies in the first quarter is generally lower than at other times of the
year. As a result, the Company's revenue and gross profit during the first
quarter of each year are typically low as compared to the other quarters.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2. EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share," which simplifies the standards required under
existing accounting rules for computing earnings per share and replaces the
presentation of primary earnings per share and fully diluted earnings per share
with basic earnings per share ("basic EPS") and diluted earnings per share
("diluted EPS"), respectively. Basic EPS excludes dilution and is determined
by dividing income available to common stockholders by the weighted average
number of shares of common stock outstanding during the period. Diluted EPS
reflects the potential dilution that could occur if options and other contracts
to issue shares of common stock were exercised or converted into common stock.
Dilutive common equivalent shares for the three and nine month periods ended
September 30, 1998 are 15,946,428 and, 16,018,590, respectively, and for
three and nine month periods ended September 30, 1997 are 11,906,605 and
11,125,981, respectively, all attributable to stock options.
NOTE 3. LONG-TERM DEBT
On January 20, 1998, the Company restructured its credit arrangements with
Hibernia National Bank. Under the restructured facility (the "Credit
Facility"), the Company refinanced an $11.0 million loan, obtained a $10.0
million revolving line of credit to finance working capital requirements, and
obtained a $9.0 million line of credit to finance capital expenditures and
acquisitions. As of September 30, 1998, the Company had approximately $24.6
million outstanding under the Credit Facility. The Credit Facility has a final
maturity of January 20, 2000, and bears interest at LIBOR plus an applicable
margin, ranging from 1.25% to 2.25% (6.91% at September 30, 1998).
Update for Bridge Loan?
NOTE 4. ACQUISITIONS
In April 1998, the Company acquired Eagle Surveys International, Inc., a
seismic survey support company, headquartered in Houston, Texas. The aggregate
purchase price was $1.8 million consisting of $1.1 million in cash and 53,039
shares of common stock.
In April 1998, the Company acquired the assets of Coastal Turbines, Inc., a
helicopter support company, based in Lafayette, Louisiana. The aggregate
purchase price was approximately $1.2 million consisting of $1.1 million in
cash and 4,546 shares of common stock.
In May 1998, the Company acquired Hamilton Drill Tech, Inc., a specialty
seismic drilling support company, headquartered in Canada. The purchase price
was approximately $0.9 million in cash.
In July 1998, OMNI International Energy Services, Ltd. (a wholly-owned
subsidiary) entered into a joint venture with Edwin Waldman Attie of Bolivia.
The newly formed joint venture company, OMNI International Energy Services -
South America, Ltd. provides seismic line cutting and survey support services
in South America. The aggregate investment was approximately $6.5 million,
consisting of approximately $2.6 million in cash, which was paid in the fourth
quarter, $2.0 million in equipment and 155,947 shares of common stock. In
consolidation, the Company owns an 85% interest in the joint venture.
These acquisitions were accounted for using the purchase method of accounting.
The excess of cost over the estimated fair value of the net assets acquired
resulted in goodwill of approximately $4.6 million. The operating results of
each of the acquired companies have been included in the consolidated
statements of income from the date of acquisition. The pro forma effect of the
acquisitions as though they occurred as of the beginning of each period
presented is not material.
In July 1997, the Company acquired substantially all of the assets and
liabilities of American Aviation Incorporated ("American Aviation") for
approximately $7.9 million in cash and stock and assumed debt of approximately
$6.7 million. The following summarized unaudited income statement data reflects
the Company's results of operations as if the American Aviation transaction
had taken place on January 1, 1997:
UNAUDITED PRO FORMA RESULTS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(Thousands of dollars, except per share amount)
Revenue $ 36,335
Net income $ 2,948
Basic income per share $ 0.27
NOTE 5. ASSET IMPAIRMENT AND OTHER CHARGES
In response to recent market conditions and the resultant decline in certain
asset utilization of the Company's equipment, the Company evaluated certain of
its assets for realizability. The related asset impairment charges relate to a
$1.8 million provision for fixed assets, primarily nine drilling units which
have become impaired, due to recent changes in market conditions; a $1.3
million write-off of an asset held for sale which has become impaired due to
recent price declines; and a $0.6 million additional provision for
uncollectible accounts receivable.
In addition, in response to anticipated future market conditions, the Company's
senior management and its Board of Directors approved a plan to reduce furture
operating costs and improve operating efficiencies. The plan involves several
factors including the restructuring of senior management and the relocation of
certain of its operational facilities. Accordingly, the company has recorded
an accrual of severance and lease exit costs of $0.3 million.
The $0.6 million provision for uncollectible accounts receivable is reported in
general and administrative expenses and the remaining charges are reported as
asset impairment and other charges in the accompanying consolidated Statements
of Income.
NOTE 6. RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. Management believes the implementation of this
statement will not have a material effect on its results of operations or
financial statement disclosures.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion should be read in conjunction with the financial
statements and the accompanying notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
GENERAL
Demand. Demand for the Company's services is principally affected by
conditions affecting geophysical companies engaged in the acquisition of 3-D
seismic data. The level of activity among geophysical companies is primarily
affected by the level of capital expenditures by oil and gas companies for
seismic data acquisition activities. A number of factors influence the
decision of oil and gas companies to pursue the acquisition of seismic data,
including (i) prevailing and expected oil and gas demand and prices; (ii) the
cost of exploring for, producing and developing oil and gas reserves; (iii) the
discovery rate of new oil and gas reserves; (iv) the availability and cost of
permits and consents from landowners to conduct seismic activity; (v) local and
international political and economic conditions; (vi) governmental regulations;
and (vii) the availability and cost of capital. The ability to finance the
acquisition of seismic data in the absence of oil and gas companies' interest
in obtaining the information is also a factor as some geophysical companies
will acquire seismic data on a speculative basis. Onshore 3-D seismic data
acquisition activity has substantially increased over the past few years;
however, any significant reduction in seismic exploration activity in the areas
where the Company operates would result in a reduction in the demand for the
Company's services and could have a material adverse effect on the Company's
financial condition and results of operations.
Within the last decade, improvements in drilling and production
techniques and the acceptance of 3-D imaging as an exploration tool have
resulted in significantly increased seismic activity throughout the Transition
Zone (the marsh, swamp, shallow water and contiguous dryland areas along the
U.S. Gulf Coast). Due to this increased demand, the Company has significantly
increased its capacity, as measured by drilling units, support equipment and
employees. In addition, the Company has expanded the geographic scope of its
operations to Alaska, the Rocky Mountain region and Western states, the U.S.
plains and Canada. Recently, the Company also announced its intention to
expand into the South American market, initially in Bolivia. This expansion
has led to significant increases in the Company's revenue and generally
commensurate increases in operating expenses and selling, general and
administrative expenses. If anticipated expansion plans are realized,
management would expect these expenses to continue to increase as a direct
correlation to the growth in its operations.
Backlog. Most of the Company's seismic drilling projects are awarded
pursuant to a competitive bidding process. Once the Company's bid on a
particular project has been accepted and a start date for the project has been
scheduled, the Company will include the project in its backlog. As of
September 30, 1998, the Company's backlog was $62.1 million, compared to $70.0
million at December 31, 1997. Typically, the Company's backlog is higher at
the end of the first and fourth quarters as the Company's customers tend to
plan their exploration budgets for the coming year and award projects
accordingly during the first and fourth quarters of each year. Projects
currently included in the Company's backlog are subject to rescheduling or
termination without penalty at the option of the customer, which could
substantially reduce the amount of backlog currently reported and the revenue
generated from the backlog. Historically, the Company has not experienced a
large volume of project delays or terminations, and those projects that have
been delayed or terminated have typically been replaced by unscheduled
projects. Nevertheless, delay or termination of a number of large projects in
the Company's existing backlog could have a material adverse effect on the
Company's revenue, net income and cash flow.
Seasonality and Weather. The Company's operations are subject to
seasonal variations in weather conditions and daylight hours. Since the
Company's activities take place outdoors, on average fewer hours are worked per
day and fewer holes are generally drilled or surveyed per day in the winter
months than in summer months. Furthermore, demand for seismic data acquisition
activity by oil and gas companies in the first quarter is generally lower than
at other times of the year. In addition, the Company's operations in the Rocky
Mountain area and in Alaska and Canada are subject to the seasonal climatic
conditions of those areas. As a result, the Company's revenue and gross profit
during the first quarter of each year are typically less as compared to the
other quarters.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended SEPTMEBER 30, Nine Months Ended SEPTEMBER 30,
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---- ---- ---- ----
Operating revenue $ 19,905 $ 16,976 $ 62,483 $ 33,489
Operating expense 17,016 12,515 45,374 25,017
Gross profit 2,889 4,461 17,109 8,972
General and administrative expenses 4,378 1,816 9,214 3,090
Asset impairment and other charges 3,379 --- 3,379 ---
Operating income (loss) (4,868) 2,645 4,516 5,882
Interest expense 474 604 1,211 1,226
Other income (expense) (81) (4) 200 12
Income (loss) before taxes (5,423) 2,037 3,505 4,668
Income tax expense (benefit) (2,180) --- 1,391 ---
Net income (loss), including
minority interest (3,243) 2,037 2,114 4,668
Minority interest 17 --- 17 ---
Net income (loss) $ (3,260) $ 2,037 $ 2,097 $ 4,668
</TABLE>
Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997
Operating revenues increased 17%, from $17.0 million for the three month
period ended September 30, 1997 to $19.9 million for the three month period
ended September 30, 1998. This increase is primarily attributable to a $1.9
million increase in survey revenues from $1.4 million in the third quarter of
1997 to $3.3 million in the third quarter of 1998. The number of survey crews
increased from 16 at September 30, 1997 to 36 at September 30, 1998. The
Company's aviation division contributed approximately $3.2 million in the third
quarter of 1998, a 39% increase over third quarter of 1997 revenues of $2.3
million. At September 30, 1998, the Company operated 22 helicopters, a 57%
increase over the 14 helicopters operated at September 30, 1997. Drilling
revenues decreased $1.1 million, from $13.3 million to $12.2 million for the
three months ended September 30, 1997 and 1998, respectively. This decrease is
primarily attributable to tropical storms and hurricanes experienced on the
Gulf Coast in the third quarter of 1998. The decrease in drilling revenues was
offset by line-cutting revenues of $1.2 million resulting from the Company's
Bolivian joint venture which was effective July 1, 1998. The Company employed
784 employees for both field and administrative operations at September 30,
1998 compared to 608 at September 30, 1997, a 29% increase. As of September
30, 1998, the Company's drilling capacity, as measured by drilling units, had
increased 77% to 214% units compared to 121 units at September 30, 1997.
Operating expenses increased 36%, from $12.5 million in the three month
period ended September 30, 1997 to $17.0 million in the three month period
ended September 30, 1998. This increase is primarily due to the completion of
six acquisitions in 1997 and four acquisitions in 1998, including the joint
venture, each of which expanded the scope of the Company's operations.
Additionally, the Company estimates approximately $0.2 million in costs were
incurred as a result of the unfavorable weather conditions described above.
Due to the increase in the Company's workforce, total payroll expense increased
47%, from $5.1 million to $7.5 million for the three month periods ended
September 30, 1997 and 1998, respectively. The Company's surveying division
incurred $1.0 million in contract service expenses from third party survey
companies during the third quarter of 1998, a $0.3 million increase over the
third quarter of 1997. Repairs and maintenance costs were $2.9 million in the
third quarter of 1998, a $1.3 million increase over the third quarter of 1997
costs of $1.6 million, primarily due to the increase in the number and
utilization of the Company's seismic drilling and transportation equipment.
The increase in the number of equipment units and aircraft also resulted in a
71% increase in depreciation from $0.7 million in the three months ended
September 30, 1997 to $1.2 million in the three months ended September 30,
1998.
General and administrative expenses were $4.4 million for the three
months ended September 30, 1998, compared to $1.8 million for the three months
ended September 30, 1997, a 144% increase. Increases in office personnel,
payroll taxes and insurance accounted for $0.8 million, or 31% of this
increase. Bad debt expense increased $0.6 million, as a result of the
re-evaluation of certain accounts receivable in accordance with the
restructuring plan approved in the third quarter of 1998. Demands of being a
public company and expanded operations contributed to this increase as
business promotions, travel and investor relations costs increased $0.4
million to $0.6 million for the third quarter of 1998.
Operating income for the three months ended September 30, 1998 is reduced
by a non-recurring charge of $4.0 million for the restructuring plan approved
by the Company during the period. Of this charge, $0.6 million relates to an
additional reserve for bad debts and is recorded in the general and
administrative expenses. The remaining charge of $3.4 million consists of the
write-off or write-down of certain assets ($3.1 million) and an accrual for
severance and lease exit costs ($0.3 million).
Due to the loss for the quarter, there was an income tax benefit of $2.2
million for the three months ended September 30, 1998. The Company converted
to a taxable entity on December 4, 1997. Accordingly, no provision was made
for income taxes during the third quarter ended September 30, 1997. The
proforma adjustment included in the Company's statement of income reflects a
provision for income taxes at a combined 40% federal and state income tax rate.
Net loss for the quarter ended September 30, 1998 was $3.3 million,
compared to proforma net income for the third quarter ended September 30, 1997
of $1.2 million. Asset impairment and other charges accounted for $2.4 million
of the loss, net of tax.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September
30, 1997
Operating revenues increased 84% from $34.0 million for the nine month
period ended September 30, 1997 to $62.5 million for the nine month period
ended September 30, 1998. Drilling revenues increased $12.1 million, or 40%,
from $30.1 million to $42.2 million for the nine month periods ended September
30, 1997 and 1998, respectively. Survey revenues increased $9.1 million from
$1.6 million for the nine months ended September 30, 1997 to $10.7 million for
the nine months ended September 30, 1998. Aviation revenues increased $6.1
million to $8.4 million for the nine month period ended September 30, 1998.
And, line cutting revenues were $1.2 million for the nine months ended
September 30, 1998; there were no similar revenues for the first nine months of
1997. The acquisition of six companies in 1997 and four companies, including
the Bolivian joint venture, in 1998 is the primary factor contributing to the
significant increase in the Company's revenues. These acquisitions contributed
$3.9 million in revenues for the nine months ended September 30, 1997, compared
to $25.2 million for the nine months ended September 30, 1998, a $21.3 million
increase. Internal growth resulting from increased industry demand for 3-D
seismic data accounted for $7.2 million, or 25%, of the increase in revenues.
Operating expenses increased $20.4 million, or 82%, from $25.0 million to
$45.4 million in the nine months ended September 30, 1997 and 1998,
respectively. Total payroll expense increased $10.0 million to $20.6 million
for the nine months ended September 30, 1998. Contract services increased from
$0.8 million for the nine month period ended September 30, 1997 to $4.1 million
for the nine month period ended September 30, 1998. Repairs and maintenance
costs were $6.3 million in the nine months ended September 30, 1998, a 91%
increase over the nine month period ended September 30, 1997 costs of $3.3
million. Explosives and insurance expense each increased $0.5 million, or 16%
and 63%, respectively in the nine month period ended September 30, 1998 as
compared to the nine month period ended September 30, 1997. Depreciation
expense increased 120% from $1.5 million to $3.3 million for the nine month
periods ended September 30, 1997 and September 30, 1998, respectively. These
increases were the result of increases in the size of the Company's workforce,
increases in the number and utilization of the Company's drilling and support
equipment, and the expanded scope of the Company's operations due primarily to
the acquisitions described above. Although operating expenses increased
significantly, as a percentage of revenue, operating expenses decreased from
74% to 73% for the nine months ended September 30, 1997 and 1998, respectively.
Gross profit increased from 90% from $9.0 million for the nine month
period ended September 30, 1997 to $17.1 million for the nine month period
ended September 30, 1998. The 10 acquired companies, including the joint
venture, contributed $8.1 million in gross profit for the nine months ended
September 30, 1998 compared to $0.9 million for the nine months ended September
30, 1997, an increase of $7.2 million. Combined gross margins increased from
26% to 27% for the nine month periods ended September 30, 1997 and 1998,
respectively.
General and administrative expenses were $9.2 million for the nine months
ended September 30, 1998, a 197% increase over the nine months ended September
30, 1997 expenses of $3.1 million. Increases in office personnel, payroll
taxes and insurance accounted for $2.5 million, or 36%, of this increase. Bad
debt expense increased $1.0 million, from $0.1 million in the nine months ended
September 30, 1997 to $1.1 million in the nine months ended September 30, 1998.
Of this increase, $0.6 million is related to the re-evaluating of certain
accounts receivable in accordance with the restructuring plan approved in the
third quarter of 1998. As a result of the acquisitions, amortization expense
increased $0.4 million, from $0.1 million to $0.5 million in the nine month
periods ended September 30, 1997 and 1998, respectively. Advertising, travel
and entertainment, and shareholder relations costs increased $1.0 million to
$1.2 million for the nine months ended September 30, 1998, due to the demands
of being a public company.
Operating income for the nine months ended September 30, 1998 is reduced
by a charge of $4.0 million for certain asset write-down and other charges
during the third quarter of 1998. Of this charge, $0.6 million relates to an
additional reserve for bad debts and is recorded in the general and
administrative expenses. The remaining charge of $3.4 million consists of
the write-off or write-down of certain assets ($3.1 million) and an accrual for
severance and lease exit costs ($0.3 million).
Income tax expense was $1.4 million for the nine months ended September
30, 1998. The Company converted to a taxable entity on December 4, 1997.
Accordingly, no provision was made for income taxes during the first nine
months of 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had approximately $2.3 million in
cash, compared to approximately $8.7 million at December 31, 1997. The
decrease in cash was primarily due to capital expenditures in the first nine
months of 1998, totaling approximately $19.3 million, including the cash
portion of the consideration paid for the three acquisitions completed in the
second quarter of 1998, which totaled approximately $2.9 million. Expenditures
during the first nine months of 1998 were partially offset by the sale of the
Company's fixed-wing charter division for approximately $2.9 million in cash
and by net cash provided by financing activities of $11.3 million. The
Company's cash position at December 31, 1997 was also higher than normal due to
the receipt of the net proceeds of the Company's initial public offering of
common stock that was completed in December 1997. The Company had working
capital of $14.0 million at September 30, 1998 compared to approximately $11.5
million at December 31, 1997. This increase was primarily due to increased
inventory.
On January 20, 1998, the Company restructured its credit arrangements
with its commercial lender, Hibernia National Bank. Under the restructured
facility (the "Credit Facility"), the Company refinanced an $11.0 million term
loan, obtained a $10.0 million revolving line of credit to finance working
capital requirements, and obtained a $9.0 million line of credit to finance
capital expenditures and acquisitions. As of September 30, 1998, the Company
had approximately $24.6 million of indebtedness outstanding under the Credit
Facility. Outstanding indebtedness under the Credit Facility bears interest at
LIBOR plus an applicable margin, ranging from 1.25% to 2.25% (6.91% at June 30,
1998). The Credit Facility has a final maturity of January 20, 2000, is
required to be guaranteed by all of the Company's U.S. subsidiaries, requires
the Company to maintain certain financial ratios, imposes certain limitations
on the Company's ability to pay cash dividends and is collateralized by a
mortgage on the Company's land and buildings and by substantially all of the
Company's assets not used as collateral for the Company's asset-based loans.
The Company had approximately $6.9 million in outstanding indebtedness in
addition to outstanding indebtedness under the Credit Facility at September 30,
1998. The majority of this debt (approximately $5.4 million) consists of
several asset-based financing loans with another lender. Of the principal
outstanding under these loans, approximately $3.9 million bears interest at
LIBOR plus 3.75% and matures on July 19, 2001. The remaining portion of this
loan bears interest at LIBOR plus 3.0% and is collateralized by various seismic
drilling, support equipment and aircraft. Remaining indebtedness at September
30, 1998 was approximately $1.5 million, including approximately $1.3 million
owed to finance companies incurred to finance certain of the Company's
insurance premiums.
In November 1998, the Company entered into a $6.6 million Bridge
Facility with Hibernia National Bank for the primary purpose of funding the
Bolivian joint venture. Currently, the Company has approximately $2.6 million
outstanding under this agreement. Outstanding, indebtedness bears interest at
LIBOR plus an applicable margin, ranging from 1.25% to 2.25% (6.91% at November
13, 1998). The Bridge Facility has a final maturity of May 1999. In the event
the Company does not refinance the Bridge Facility at maturity, interest will
increase by one-half of 1% per month.
In the third quarter of 1998, the Company made capital expenditures of
approximately $3.7 million, including $2.5 million for the purchase or
construction of seismic drilling and support equipment, $0.8 million for
the purchase of one helicopter, $0.2 million for the purchase of support
vehicles and $0.2 million for various building and leasehold improvements.
Management believes that cash generated from operations and the Company's
Credit Facility will be sufficient to meet the Company's anticipated capital
expenditures for 1998. However, part of the Company's strategy is to acquire
companies with operations related or complementary to the Company's current
operations. Depending on the size of such future acquisitions, the Company may
require additional debt financing, possibly in excess of the limits of the
Credit Facility, or equity financing.
YEAR 2000 COMPLIANCE
The Year 2000 (Y2K) issue is the result of computerized systems being
written to store and process the year portion of dates using two digits rather
than four. Date-aware systems (i.e., any system or component that
performs calculations, comparisons, sequencing, or other operations involving
dates) may fail or produce erroneous results on or before January 1, 2000
because the year 2000 will be interpreted as the year 1900.
State Of Readiness
The Company has been pursuing a strategy to ensure all its significant
computer systems will be able to process dates from and after January 1,2000,
including leap years, without critical systems failure (Y2K Compliant or
Y2K Compliance). Computerized systems are integral to the operations of the
Company, particularly for accounting and operations control. Progress of the
Y2K plan is being monitored by senior management. The Company believes all
critical components of the plan are on schedule for completion by the end of
the second quarter of 1999.
The majority of computerized date-sensitive hardware and software
components used by the Company are covered by maintenance contracts with the
vendors who originally implemented them. Almost all of these vendors have
already been contacted regarding Y2K Compliance of their products. Where
necessary, software modifications to ensure compliance will be provided by the
appropriate vendors under their maintenance contracts.
Information Technology and Non-Information Technology Systems
The bulk of computerized business systems processing is provided
through commercial third party software licensed by the Company. The Y2K
Compliant version of its asset management and accounting software package is
being tested by the Company with implementation work scheduled for
completion in the fourth quarter of 1998. Additionally, the Company is
currently in the process of investigating more sophisticated accounting
software packages to meet their reporting and operational needs. The
software conversion is scheduled for completion during the first quarter of
1999. An assessment of all embedded systems contained in the Company's
buildings, equipment and other infrastructure is scheduled for completion
during the fourth quarter of 1998.
Third Party Risks
The Company's computer systems are not widely integrated with the
systems of its suppliers or customers. The primary potential Y2K risk
attributable to third parties would be from a temporary disruption in
certain materials and services provided by third parties. Effective November
1, 1998, Y2K Compliance requirements have been included in all purchasing
contracts. An assessment of Y2K third-party risk is under way and scheduled
for completion in the fourth quarter of 1998.
Costs To Address The Y2K Issues
Based on current information, the Company believes that the cost
of Y2K Compliance will not be significant and will be provided for through
its normal operating and capital budgets. If the software modifications and
conversions referred to above are not made, or are delayed, the Y2K issue
could have a material impact on operations. Additionally, the above cost
estimates are based on management's best estimates, which are derived
using numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. There can be no assurance that the systems of other companies will be
converted on a timely basis or that failure to convert will not have a material
adverse effect on the Company.
Risks Of The Y2K Issues
Based on preliminary risk assessment work conducted thus far, the
Company believes the most likely Y2K related failures would probably be
temporary disruption in certain materials and services provided by third
parties, which would not be expected to have a material adverse effect
on the Company's financial condition or results of operations. A more
definitive assessment of this risk will be available at the conclusion of
the assessment phase of the Y2K project, which is scheduled for
completion in the fourth quarter of 1998.
Contingency Plans
Although the Company believes the likelihood of any or all of the above
risks occurring to be low, specific contingency plans to address certain
risk areas will be developed, as needed, beginning in the first quarter of
1999. There can be no assurance that the Company will not be materially
adversely affected by Y2K problems, or related costs.
FORWARD-LOOKING STATEMENTS AND ASSUMPTIONS
This quarterly report on Form 10-Q may contain certain forward-looking
statements, including by way of illustration and not of limitation, statements
relating to the Company's liquidity, revenues, expenses and margins. Any
statement made herein that is not a historical fact is a forward-looking
statement. The Company strongly encourages readers to note that such
statements are based on assumptions made about the Company's financial
position, operations and industry which management considers reasonable at this
time. Most of the factors upon which such assumptions are made are beyond the
Company's ability to control or estimate precisely, and may in some cases be
subject to rapid and material changes.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. See Exhibit Index on Page E-1
(b) REPORTS ON FORM 8-K. None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNI ENERGY SERVICES CORP.
Dated: September 13, 1998 /S/ DAVID A. JEANSONNE
-----------------------
David A. Jeansonne
Chief Executive Officer
Dated: September 13, 1998 /S/ JOHN H. UNTEREKER
------------------------
John H. Untereker
Executive Vice President
(Principal Financial and Accounting Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. NUMBERED PAGE
- - ------------ --------------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation of the
Company.(1)
3.2 By-laws of the Company.(1)
10.1 Joint Venture Agreement among the Company, OMNI International
Energy Service, Ltd. and Edwin Waldman Attie effectively dated
July, 1, 1998.
10.2 Employment Agreement and Non-Competition Agreement between
Robert F. Nash and the Company.
10.3 Third Amendment to Amended and Restated Loan Agreement, by
and among the Company, certain of its subsidiaries and
Hibernia National Bank.
27.1 Financial Data Schedule
--------------------
</TABLE>
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration Statement No. 333-36561).
JOINT VENTURE AGREEMENT
among
OMNI ENERGY SERVICES CORP.
OMNI INTERNATIONAL ENERGY SERVICES, LTD.
and
EDWIN WALDMAN ATTIE
Effective as of July 1, 1998
- 1 -
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE IDEFINITIONS ........................................................ 1
Section 1.1 Definitions ................................................ 1
ARTICLE IIFORMATION OF JOINT VENTURE COMPANY ................................ 2
Section 2.1 Formation .................................................. 2
Section 2.2 Registered Office; Name .................................... 2
Section 2.3 Branch Offices ............................................. 2
Section 2.4 Relationship of Parties .................................... 2
ARTICLE IIIPURPOSE OF THE JOINT VENTURE COMPANY;BUSINESS OPPORTUNITIES ...... 3
Section 3.1 Purpose .................................................... 3
Section 3.2 Limitation on Operations ................................... 3
Section 3.3 Subsidiaries and Affiliated Companies ...................... 3
Section 3.4 Non-Competition; Employment of Personnel ................... 3
ARTICLE IVCAPITALIZATION; ADDITIONAL SUPPORT ................................ 4
Section 4.1 Initial Issuance of Capital Stock .......................... 4
Section 4.2 Additional Closing Transactions ............................ 5
Section 4.3 Subordinated Note .......................................... 6
Section 4.4 Additional Financial Support ............................... 6
Section 4.5 Loans by Shareholders or Affiliates ........................ 7
Section 4.6 Failure to Fulfill Obligations of Section 4.4 .............. 7
Section 4.7 Advances on Guarantees ..................................... 7
Section 4.8 Limited Liability .......................................... 7
Section 4.9 Working Capital ............................................ 8
Section 4.10 In Kind Contributions ..................................... 8
ARTICLE VMANAGEMENT OF THE JOINT VENTURE COMPANY ............................ 8
Section 5.1 Board of Directors ......................................... 8
Section 5.2 Officers ................................................... 8
Section 5.3 Resolution of Disputes ..................................... 9
ARTICLE VIOPERATIONAL AND ADMINISTRATIVE SUPPORT; AIRCRAFT .................. 9
Section 6.1 Operational and Administrative Support ..................... 9
Section 6.2 Aircraft .................................................. 10
ARTICLE VIILIABILITY OF PARTIES ............................................ 10
Section 7.1 Liability; Indemnity ...................................... 10
ARTICLE VIIIBUDGET AND ACCOUNTING .......................................... 12
Section 8.1 Budget .................................................... 12
Section 8.2 JV Administration ......................................... 12
ARTICLE IXINSURANCE ........................................................ 14
Section 9.1 Insurance ................................................. 14
Section 9.2 Relationship to Indemnification ........................... 15
ARTICLE XREPRESENTATIONS AND WARRANTIES .................................... 15
Section 10.1 Representations and Warranties of OMNI and OMNI
International..................................................... 15
Section 10.2 Representations and Warranties of Waldman ................ 16
ARTICLE XITRANSFER RESTRICTION ............................................. 18
Section 11.1 No Transfer .............................................. 18
Section 11.2 Auction .................................................. 19
Section 11.3 Purchase of Waldman Shares ............................... 19
Section 11.4 Right of First Refusal ................................... 20
ARTICLE XIITERMINATION ..................................................... 21
Section 12.1 Termination of Agreement ................................. 21
Section 12.2 Result of Termination .................................... 22
Section 12.3 Dissolution of the Joint Venture Company ................. 23
ARTICLE XIII ADDITIONAL COVENANTS OF THE PARTIES ........................... 24
Section 13.1 Payment of Obligations ................................... 24
Section 13.2 Corporate Existence ...................................... 24
Section 13.3 Compliance with Laws ..................................... 24
Section 13.4 Notice of Liquidation Event .............................. 24
ARTICLE XIVLIMITATION OF LIABILITY ......................................... 24
ARTICLE XVMISCELLANEOUS .................................................... 24
Section 15.1 Confidentiality .......................................... 24
Section 15.2 Translations ............................................. 25
Section 15.3 Conflicts ................................................ 25
Section 15.4 Further Assurances ....................................... 25
Section 15.5 Choice of Law ............................................ 26
Section 15.6 Arbitration .............................................. 26
Section 15.7 Notices .................................................. 27
Section 15.8 Legend ................................................... 28
Section 15.9 Exclusive Benefits ....................................... 28
Section 15.10 Assignment .............................................. 28
Section 15.11 Remedies ................................................ 28
Section 15.12 Breach of Agreement ..................................... 29
Section 15.13 Modification ............................................ 29
Section 15.14 Waiver .................................................. 29
Section 15.15 Invalid Provisions ...................................... 29
Section 15.16 Entire Agreement ........................................ 29
Section 15.17 Multiple Counterparts ................................... 29
Section 15.18 Headings; Gender ........................................ 29
Section 15.19 Expenses ................................................ 30
Section 15.20 Kiln Agreement .......................................... 30
Section 15.21 Closing Adjustments ..................................... 30
LIST OF EXHIBITS
Exhibit A DEFINITIONS
Exhibit B PROPERTY APPRAISAL
Exhibit C ASSETS
Exhibit C-1 Assets/Inventory Office
Exhibit C-2 Assets/Inventory Camp Sara
Exhibit C-3 Excluded Assets
Exhibit D BORROWED SERVANTS' AGREEMENT
Exhibit E CONTRACTS
Exhibit F EMPLOYMENT AGREEMENT
Exhibit G PROMISSORY NOTE
Exhibit H ARTICLES OF ASSOCIATION OF OMNI INTERNATIONAL ENERGY
SERVICES - SOUTH AMERICA, LTD.
Exhibit I REGISTRATION RIGHTS AGREEMENT
Exhibit J KILN AGREEMENT
- i -
<PAGE>
JOINT VENTURE AGREEMENT
This Joint Venture Agreement (the "Agreement") is entered into
effective as of the 1st day of July 1998, by and among OMNI Energy Services
Corp., a corporation organized and existing under the laws of the State of
Louisiana, United States of America and having its principal place of
business at 4500 NE Evangeline Thruway, Carencro, Louisiana 70520, U.S.A.
("OMNI"), OMNI International Energy Services, Ltd., a corporation
incorporated under laws of the Cayman Islands with its registered office
located at P. O. Box 309 GT, Grand Cayman, Cayman Islands, British West
Indies ("OMNI International"), and Edwin Waldman Attie, a resident of Santa
Cruz, Bolivia and having his principal address at Rio Ubai #4, Las Palmas,
Santa Cruz, Bolivia ("Waldman").
WITNESSETH:
WHEREAS, OMNI is engaged in providing seismic drilling, survey,
helicopter support and other related services to, and the assembly,
manufacture and repair of drilling equipment for use by, the onshore
geophysical industry ("OMNI's Business") throughout the United States and
Canada;
WHEREAS, Waldman provides line cutting services ("Waldman's Business")
to the geophysical industry in Bolivia;
WHEREAS, OMNI International is a wholly-owned subsidiary of OMNI; and
WHEREAS, OMNI, OMNI International and Waldman believe that it is in
their mutual best interests to combine certain aspects of their respective
operations to pursue opportunities to provide line cutting, seismic
drilling, survey, helicopter support and other related services to the
onshore geophysical industry throughout the Territory and to assemble,
manufacture and repair drilling equipment for use by the onshore
geophysical industry pursuant to this Agreement and by way of a joint
venture entity established in accordance with the terms and subject to the
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and the premises and
agreements set forth herein, and upon the terms, covenants and conditions
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.a DEFINITIONS. In addition to the other terms defined in
this Agreement, when used in this Agreement, unless the context otherwise
requires, capitalized terms shall have the meanings ascribed to such terms
in Exhibit "A" hereto.
ARTICLE II
FORMATION OF JOINT VENTURE COMPANY
Section 1.a FORMATION. The joint venture entity was formed as an
exempted company with limited liability under the Companies Law (1995
Revision) of the Cayman Islands (the "Joint Venture Company") by the filing
of the Memorandum and Articles of Association with respect to the Joint
Venture Company with the proper officials of the Cayman Islands on August
10, 1998.
Section 2.a REGISTERED OFFICE; NAME. The Joint Venture Company shall
have its registered office at P. O. Box 309 GT, Grand Cayman, Cayman
Islands, British West Indies, or at such other place as the Board of
Directors may determine from time to time and shall be named "OMNI
International Energy Services-South America, Ltd."
Section 3.a BRANCH OFFICES. The Joint Venture Company may establish
additional branches or agencies in places throughout the Territory as
deemed necessary or appropriate from time to time by the Board of
Directors.
Section 4.a RELATIONSHIP OF PARTIES. (a) Nothing contained in this
Agreement shall be construed as creating a partnership among Waldman, OMNI,
OMNI International or any other Shareholder, nor is anything contained in
this Agreement to be construed as creating or requiring any agency,
employee or similar relationship or other binding legal commitment between
such parties except as expressly set forth herein. The obligations, duties
and liabilities of Waldman, OMNI, OMNI International and any other
Shareholder set forth in this Agreement shall be several and not joint or
collective.
(b) No Shareholder shall have the authority or right, nor shall
any Shareholder hold itself out as having the authority or right, to
assume, create or undertake any obligation of any kind whatsoever expressed
or implied, on behalf of or in the name of the Joint Venture Company
(except as expressly set forth herein) or any other Shareholder without the
express prior written consent of all the Shareholders.
(c) The Shareholders shall do all such acts and things and cause
their respective appointees on the Board of Directors (subject to
applicable law) to cast such votes or take such other actions as may be
necessary or desirable to carry out the terms and provisions of this
Agreement and to ensure that the Joint Venture Company and all operations
conducted by the Joint Venture Company comply with the requirements of all
applicable laws and regulatory authorities.
(d) No Shareholder shall have the authority or right to borrow
money on behalf of or in the name of the Joint Venture Company or any other
Shareholder, nor shall any Shareholder pledge the credit of the Joint
Venture Company or any other Shareholder without the express prior written
consent of such other Shareholder.
ARTICLE III
PURPOSE OF THE JOINT VENTURE COMPANY;
BUSINESS OPPORTUNITIES
Section 1.d PURPOSE. The purpose of this Agreement and the Joint
Venture Company shall be to enable the parties hereto to combine certain of
their respective assets and expertise to pursue opportunities to provide
line cutting, seismic drilling, survey, helicopter support and other
related services to the onshore geophysical industry throughout the
Territory and to assemble, manufacture and repair drilling equipment for
use by the onshore geophysical industry (collectively, the "Operations").
Section 2.d LIMITATION ON OPERATIONS. The objects and scope of this
Agreement and the Joint Venture Company shall be limited to the conduct of
the Operations in the Territory, unless the Shareholders shall unanimously
agree otherwise.
Section 3.d SUBSIDIARIES AND AFFILIATED COMPANIES. The parties hereto
acknowledge that it may be appropriate from time to time to cause the
incorporation or purchase of Subsidiaries or otherwise participate in
additional joint or other business ventures in order to exploit available
opportunities to engage in the Operations throughout the Territory. If the
Board of Directors determines to form or acquire any Subsidiary, enter into
any joint or other business venture with any other Person or acquire
jointly any equity or similar interest in a Person to pursue opportunities
to engage in the Operations in the Territory, then this Agreement, if
needed, shall be amended or supplemental agreements shall be entered into
to cause the ownership and operation of any such Subsidiary, joint or other
business venture to be subject to the principles governing this Agreement
and the relationship among the Shareholders.
Section 4.d NON-COMPETITION; EMPLOYMENT OF PERSONNEL.
(a) Non-Competition. During the term of this Agreement and
thereafter as set forth below in this Section 3.4(a), no party to this
Agreement, no Shareholder and no Affiliate of any of the foregoing shall
directly or indirectly (i) engage in Operations in the Territory other than
through the Joint Venture Company or a Subsidiary thereof, (ii) compete
with the Joint Venture Company or any of its Subsidiaries for opportunities
to engage in Operations in the Territory; (iii) provide any assistance to
any Person providing or requiring Operations in the Territory other than
through the Joint Venture Company or a Subsidiary thereof; or (iv) own,
beneficially or of record, an equity or other ownership interest in any
Person or other business endeavor that engages in Operations in the
Territory other than the Joint Venture Company and its Subsidiaries;
provided that the limitation set forth in clause (iv) of this sentence
shall not apply to the ownership of less than 5% of the outstanding
securities of any entity whose securities are publicly traded. The
limitations on competition contained in this Section 3.4(a) shall remain in
effect following termination of this Agreement (i) with respect to Waldman,
any Person who has acquired beneficial ownership of any Shares issued to
Waldman (each a "Waldman Transferee"), and their respective Affiliates
until the fifth anniversary of any termination of this Agreement caused by
a purchase of Shares from Waldman or Waldman Transferees pursuant to
Sections 11.2 or 11.3 hereof or otherwise or the sale by Waldman or a
Waldman Transferee to any Third Party, including OMNI, OMNI International
or any OMNI Transferee, as defined below, pursuant to Section 11.4, and
(ii) with respect to OMNI, OMNI International and any Person who has
acquired beneficial ownership of any Shares issued to OMNI International
(each an "OMNI Transferee"), and their respective Affiliates until the
fifth anniversary of any purchase of Shares from OMNI International or any
OMNI Transferee pursuant to Section 11.2 hereof or otherwise. Except as
set forth in the immediately preceding sentence, upon any termination of
this Agreement, the limitations on competition contained in this Section
3.4(a) shall remain in effect for a period of five years after the date of
such termination (i) with respect to Waldman, all Waldman Transferees and
the respective Affiliates of each of the foregoing, provided that the term
"Operations" in the first sentence of this Section 3.4(a), for purposes of
this clause be defined as "providing seismic drilling, helicopter support
and other related services (excluding survey services) to, and the
assembly, manufacture and repair of drilling equipment for use by the
onshore geophysical industry"; and (ii) with respect to OMNI, OMNI
International, all OMNI Transferees and the respective Affiliate of each of
the foregoing; provided that the term "Operations" in the first sentence of
this Section 3.4(a) for purposes of this clause be defined as "providing
line cutting services to the geophysical industry".
(b) Employment of Personnel. During the term of this Agreement
and for a period of one year thereafter, without OMNI's prior written
consent, neither Waldman, any Waldman Transferee nor the respective
Affiliates of each of the foregoing shall solicit for employment or employ
any person who is at such time employed by OMNI, OMNI International or any
other subsidiary of OMNI and involved in the activities of the Joint
Venture Company and its Subsidiaries; provided, however, that
notwithstanding the foregoing, nothing shall prohibit the employment of any
person who responds to a general solicitation for employment published in a
newspaper of general circulation. In addition, during any period in which
the restrictions of Section 3.4(a) are applicable to Waldman, Waldman's
Transferees and their respective Affiliates or to OMNI, OMNI International,
OMNI Transferees and their respective Affiliates, as the case may be (the
"Restricted Party"), pursuant to the second sentence thereof, the
Restricted Party agrees that it shall not and shall cause its Affiliates
not to, without the prior written consent of the other party hereto or its
transferees, solicit for employment or employ any person who is at such
time employed by, or that has been at any time within the twelve months
preceding such time, employed by or contracted to work for, the Joint
Venture Company or its Subsidiaries in connection with the Operations;
provided, however, that notwithstanding the foregoing, nothing shall
prohibit the employment of any person who responds to a general
solicitation for employment published in a newspaper of general
circulation.
ARTICLE IV
CAPITALIZATION; ADDITIONAL SUPPORT
Section 1.b INITIAL ISSUANCE OF CAPITAL STOCK. (a) Waldman and OMNI
International shall subscribe for or will purchase Shares, and will cause
the Joint Venture Company, to issue Shares to each of them in accordance
with the terms set forth below:
(i) (A) At the Closing, OMNI International shall contribute
USD $500,000 in cash to the Joint Venture Company and (B) between the
date hereof and December 31, 1998, OMNI International shall contribute
an additional USD $1,975,239 to the Joint Venture Company in the form
of cash, equipment or any combination thereof, as requested by the
Board of Directors. In exchange therefor and at the Closing, the
Joint Venture Company shall issue to OMNI International 248 Shares.
In the event that OMNI International contributes equipment to the
Joint Venture Company pursuant to this Section 4.1(a)(i), OMNI
International shall be deemed to have contributed to the Joint Venture
Company an amount equal to the retail price of such equipment and will
provide Waldman with either an invoice issued by a Third Party with
respect to the piece of equipment so contributed or an invoice of OMNI
or one of its Affiliates with respect to sale by OMNI or such
Affiliate of a similar piece of equipment to a Third Party.
(ii) At the Closing, Waldman shall transfer, or cause to be
transferred, good, valid and marketable title to 26.47% the Property
and the Assets to the Joint Venture Company, free and clear of any
mortgages, liens, claims or other encumbrances of any kind. In
exchange therefor, the Joint Venture Company shall issue 44 Shares to
Waldman at the Closing. At the Closing, Waldman shall execute such
documents, instruments and agreements as are necessary to transfer to
the Joint Venture Company good, valid and marketable title to the
Property and Assets, free and clear of any mortgages, liens, claims or
other encumbrances of any kind. The parties hereto stipulate and
agree that the 26.47% interest in the Property and Assets have an
aggregate fair market value of USD $436,797.
(b) Following the issuance of Shares contemplated by Section
4.1(a), Waldman and OMNI International shall adopt the Articles of
Association (if not already adopted).
Section 2.b ADDITIONAL CLOSING TRANSACTIONS. (a) At the Closing,
Waldman shall sell and transfer to OMNI good, valid and marketable title to
85% of the Goodwill and the Contracts and 62.5% of the Property and the
Assets, free and clear of liens, claims and encumbrances of any kind. In
consideration for such portion of the Goodwill, Contracts, Property and
Assets, at the Closing, OMNI shall (i) pay Waldman USD $2,139,200 in
cash, (ii) deliver to Waldman certificates representing 75,947 shares of
OMNI Common Stock and (iii) deliver to Waldman 80,000 shares of OMNI Common
Stock, which 80,000 shares shall be subject to registration under the
Securities Act of 1933 pursuant to the Registration Rights Agreement set
forth as Exhibit I. Between August 24 and August 31, 1998, OMNI shall
advance to Mr. Waldman an aggregate of up to USD $200,000, which aggregate
amount shall reduce the obligation of OMNI set forth above to pay USD
$2,139,200 at the Closing. Waldman will execute a promissory note or notes
simultaneously with each such advance in a form to be agreed to.
(b) At the Closing, OMNI shall cause the portion of the
Contracts, Goodwill, Property and Assets acquired by it pursuant to
Sections 4.2(a) and 4.1(a)(ii) to be transferred to the Joint Venture
Company in exchange for 426 Shares. Additionally, at the Closing, Waldman
shall transfer good, valid and marketable title to the remaining 15% of the
Goodwill and Contracts and 11.03% of the Property and Assets, free and
clear of liens, claims and encumbrances of any kind, to the Joint Venture
Company in exchange for 75 Shares. The parties hereto stipulate and agree
that the 85% of the Goodwill and Contracts and the 62.5% of the Property
and Assets transferred by OMNI to the Joint Venture Company has an
aggregate fair market value of USD $4,259,082 and that the 15% of Goodwill
and Contracts and the 11.03% of the Property and Assets transferred by
Waldman to the Joint Venture Company has an aggregate fair market value of
USD $751,613.
(c) Waldman shall (i) at the Closing, cause Liderco, Ltda., a
Bolivian limitada ("Liderco"), to cease operations and (ii) cause Liderco
to be dissolved and liquidated as soon as practicable after the Closing.
(d) At the Closing, the parties shall cause the Joint Venture
Company to assume all accounts payable attributable to the conduct of
Waldman's Business in the ordinary course by Waldman and which arose from
and after July 1, 1998.
Section 3.d SUBORDINATED NOTE. At the Closing, OMNI International
shall provide a line of credit of up to $524,761 to the Joint Venture
Company, which will be evidenced by a promissory note executed by the Joint
Venture Company, in the form attached hereto as Exhibit G (the "Promissory
Note"), payable to OMNI International. Until the full amount of the
Promissory Note has been borrowed, (i) no Shareholder shall be entitled to
exercise its right to demand that all Shareholders subscribe for additional
Shares pursuant to Section 4.4(b) and (ii) OMNI International and Waldman
agree to cause their respective representatives on the Board of Directors
to authorize borrowings under the Promissory Note prior to seeking any
additional financial support from the Shareholders.
Section 4.d ADDITIONAL FINANCIAL SUPPORT. (a) Each Shareholder
shall, upon the approval of the Board of Directors, subscribe for
additional Shares and/or provide to or for the benefit of the Joint Venture
Company or its Subsidiaries, in order to secure or otherwise provide for
the conduct or expansion of Operations, guarantees or bank guarantees,
letters of credit, performance bonds, indemnities and other similar support
to the limits which shall be determined from time to time by the Board of
Directors, in proportion to the number of Shares owned by such Shareholder
or as otherwise mutually agreed to by each of them and the Board of
Directors; provided that a Shareholder will not be obligated to perform its
obligations under this Section 4.4(a), if within 30 days of the approval of
such obligation by the Board of Directors, such Shareholder seeks
arbitration in accordance with the provisions of Section 15.6 hereof and
receives a final decision of the arbitrators stating that no legitimate
business reason exists to support the decision of the Board of Directors to
demand additional financial support from the Shareholders. Each additional
Share issued by the Joint Venture Company pursuant to this Section 4.4(a)
shall be issued in exchange for consideration valued by the Board of
Directors to be equivalent to the book value per Share of the issued and
outstanding Shares as of the end of the Joint Venture Company's most
recently ended fiscal quarter as determined from the quarterly financial
statements prepared in accordance with Section 8.2(c) hereof for such
quarter.
(b) Notwithstanding the provisions of Section 4.4(a), at any
time or times during the term of this Agreement, any Shareholder may
unilaterally demand that all Shareholders subscribe for additional Shares
in the Joint Venture Company, which shall be subscribed to, and purchased
by, each Shareholder in proportion to the percentage of the total
outstanding Shares then owned by such Shareholder. No more than USD $4.0
million shall be required to be paid in the aggregate for Shares issued
pursuant to this Section 4.4(a), each of which shall be issued in exchange
for cash equal to the book value per Share of the issued and outstanding
Shares as of the end of the Joint Venture Company's most recently ended
fiscal quarter as determined from the quarterly financial statements
prepared in accordance with Section 8.2(c) hereof for such quarter. No
Shareholder will have the right to seek arbitration with respect to any
demand made pursuant to this Section 4.4(b).
Section 5.b LOANS BY SHAREHOLDERS OR AFFILIATES. Except as otherwise
provided herein, no Shares shall be issued to a Shareholder for advances of
money to the Joint Venture Company by such Shareholder or its Affiliates.
Any Shareholder or its Affiliates may lend funds to the Joint Venture
Company upon the prior approval of the Board of Directors. Any loan made
by a Shareholder or an Affiliate thereof to the Joint Venture Company shall
be upon terms and conditions (including interest) as the Board of Directors
shall determine and all such loan payments which have become due and
payable shall be made prior to any distributions to the Shareholders of the
Joint Venture Company to be made after the date of the loan. The
Shareholders and their Affiliates will have the right to lend funds to the
Joint Venture Company in accordance with their proportionate ownership
interests in the Joint Venture Company, but no Shareholder nor any
Affiliate thereof shall be required to lend funds to the Joint Venture
Company. Except as otherwise approved by the Board of Directors,
undistributed earnings and profits of the Joint Venture Company shall not
be considered an advance of money to the Joint Venture Company.
Section 6.b FAILURE TO FULFILL OBLIGATIONS OF SECTION 4.4. Should any
Shareholder (the "Defaulting Party") or Affiliate thereof fail to subscribe
for any additional Shares required to be subscribed for by such Shareholder
pursuant to Section 4.4 hereof at the times or in the amounts required of
it, any other Shareholder may, at its sole option, subscribe for such
Shares; provided, however, that the Shareholder which intends to exercise
this option (the "Contributing Party") shall provide notice of its
intention to the Defaulting Party, and the Defaulting Party shall have a
reasonable period of time under the circumstances, taking into account the
schedule to which such additional capital is needed to carry out
Operations, but not to exceed thirty (30) days, to subscribe for such
Shares. Shares issued to a Contributing Party pursuant to this Section 4.6
shall be issued for the same amount and type of consideration as was
required of the Defaulting Party.
Section 7.b ADVANCES ON GUARANTEES. Funds actually paid by any
Shareholder, or its Affiliates, pursuant to any guarantees provided
pursuant to Section 4.4 hereof shall, for the purposes of this Agreement,
be thereafter treated as an advance or loan to the Joint Venture Company as
if it had been provided as contemplated in Section 4.5 hereof.
Section 8.b LIMITED LIABILITY. Neither Shareholder shall have any
funding obligation or liability to the Joint Venture Company beyond its
obligations pursuant to this Article 4, except as provided by law or
otherwise expressly provided for in this Agreement.
Section 9.b WORKING CAPITAL. The parties hereto agree that the Joint
Venture Company shall retain from the initial subscriptions of the
Shareholders and additional subscriptions such funds as are required to
provide the working capital necessary for the operation of the Joint
Venture Company in such amounts as may be determined from time to time by
the Board of Directors in the approved annual operating budget.
Section 10.b IN KIND CONTRIBUTIONS. All Shareholders must approve the
type and value of any contribution that is made to the Joint Venture
Company in kind, except for in kind contributions made by OMNI
International pursuant to Section 4.1(a)(i), which shall be governed by the
specific provisions of that Section.
ARTICLE V
MANAGEMENT OF THE JOINT VENTURE COMPANY
Section 1.b BOARD OF DIRECTORS. (a) Except as otherwise expressly
set forth herein, in the Articles of Association or in the Memorandum of
Association, the business and affairs of the Joint Venture Company shall be
managed by or under the direction of the Board of Directors. The Board of
Directors shall have the power and authority to make all decisions
concerning the management and affairs of the Joint Venture Company, and
shall be empowered to authorize all things necessary, proper or desirable
to carry out the business of the Joint Venture Company. To the extent not
inconsistent with the terms of this Agreement, the Articles of Association
or the Memorandum of Association, the Board of Directors may establish such
guidelines regarding its operations and functions as it deems necessary or
desirable. The Board of Directors shall consist of five members, three of
whom shall be nominated by OMNI International (together with any OMNI
Transferees) and two of whom shall be nominated by Waldman (together with
any Waldman Transferees). Each member of the Board of Directors shall
serve a term of one year and until his successor is elected and qualified.
OMNI International hereby agrees to vote, and cause any OMNI Transferee to
vote, its Shares so as to cause the nominees of Waldman and the Waldman
Transferees to be elected to the Board of Directors; and Waldman hereby
agrees to vote, and cause any Waldman Transferees to vote, his Shares so as
to cause the nominees of OMNI International and OMNI Transferees to be
elected to the Board of Directors. By the execution and delivery of this
Agreement, OMNI International and Waldman hereby nominate and agree to vote
in favor of and shall elect the following persons as the initial members of
the Board of Directors: David A. Jeansonne, Steven T. Stull and Roger E.
Thomas, OMNI International's nominees, and Edwin Waldman Attie and
Florencia Lovardo, Waldman's nominees.
Section 2.a OFFICERS. (a) The principal officers of the Joint
Venture Company shall be (i) a President ("President"), who, subject to any
limitations as the Board of Directors may from time to time impose and the
provisions of the Articles of Association and Memorandum of Association,
shall be responsible for (a) overall strategic planning and direction of
the Joint Venture Company and any Subsidiary, (b) marketing and high-level
customer relations, (c) ensuring human resources are available to perform
the Operations in the Territory, (d) compliance with all laws, ordinances,
regulations and orders of governmental authorities having jurisdiction over
the Company, any Subsidiary or the Operations (e) local liaison matters
(including political, economic, social, regulatory and related matters),
and (f) management and administration of the line-cutting business, affairs
and activities of the Joint Venture Company and ensuring the line-cutting
business is properly integrated with the other aspects of the Joint Venture
Company's business; (ii) an International Manager ("International
Manager"), who, subject to any limitations as the Board of Directors may
from time to time impose and the provisions of the Articles of Association
and Memorandum of Association, shall be responsible for the survey,
drilling and helicopter support business, affairs and activities of the
Joint Venture Company; and (iii) a chief financial officer ("Chief
Financial Officer"), who, subject to the provisions of the Articles of
Association and Memorandum of Association, shall oversee and supervise the
JV Administration. Each of the President and International Manager shall
have full power and authority to take any action and to do all things on
behalf of the Joint Venture Agreement and any Subsidiary deemed necessary
to the performance of his duties, as set forth above, subject only to the
direction and supervision of the Board of Directors. The International
Manager shall participate in strategic planning and marketing of the Joint
Venture Company and each of the President and International Manager shall
consult with one another and shall exchange information on a regular basis
with respect to such matters. The President, International Manager and
Chief Financial Officer shall be appointed by the Board of Directors and
each shall report directly to the Board of Directors. OMNI International
shall nominate the International Manager and Chief Financial Officer and
any replacements thereof. Waldman and OMNI International shall cause the
Joint Venture Company to enter into the Employment Agreement with Waldman
as soon as practicable after the date hereof, which shall provide that
Waldman shall be employed as President of the Joint Venture Company subject
to the specific terms and conditions thereof.
(b) Other subordinate officers of the Joint Venture Company
shall be appointed from time to time by the President, subject to the
approval of the Board of Directors.
Section 3.b RESOLUTION OF DISPUTES. If any dispute or disagreement
between the Shareholders shall arise relating to any matter requiring
unanimous approval of the Shareholders under this Agreement, the Articles
of Association or the Memorandum of Association or otherwise in this
Agreement, the representatives of each Shareholder serving on the Board of
Directors shall communicate with each other promptly with a view to
resolving such dispute or disagreement within the next 60 days of
commencing their negotiations (or such extended period as the Board of
Directors shall agree appropriate, which in no case shall exceed 120 days).
If the matter upon consideration by the Board of Directors fails to obtain
concurrence or otherwise be satisfactorily resolved within the period
prescribed herein, either Shareholder may submit such matter to arbitration
in accordance with the applicable provisions of Section 15.6 hereof.
ARTICLE VI
OPERATIONAL AND ADMINISTRATIVE SUPPORT; AIRCRAFT
Section 1.b OPERATIONAL AND ADMINISTRATIVE SUPPORT.
(a) General. OMNI or an Affiliate thereof shall assign certain
of its employees to provide operational and administrative support to the
Joint Venture Company, including the Chief Financial Officer and the
International Manager. These individuals will remain employees of OMNI or
such Affiliate and will be borrowed, assigned or otherwise seconded by the
Joint Venture Company pursuant to the terms of the Borrowed Servants'
Agreement.
(b) Conflicts of Interest. Each member of the Board of
Directors shall be permitted to consider and vote upon contracts between
the Joint Venture Company and a Shareholder or its Affiliates, and, upon
written approval thereof, with full disclosure of any material terms and
conditions relating to such contracts, by the Board of Directors with such
full disclosure, such contracts shall be valid and binding upon the Joint
Venture Company and the other party thereto and no party to any such
contract shall exercise any rights otherwise existing at law to challenge
the validity of any such contract on the basis of such self-interest, all
of which are hereby waived.
Section 2.b AIRCRAFT.
(a) Unless authorized by a resolution of the Board of Directors,
the Joint Venture Company shall not take title to any helicopters, other
aircraft or related equipment.
(b) In order to provide helicopter support operations in the
Territory to the onshore geophysical industry, upon the request of the
Board of Directors, OMNI or one of its Affiliates thereof shall lease to
the Joint Venture Company from time to time such helicopters, aircraft and
other related assets as are needed pursuant to terms and conditions as
negotiated between the Joint Venture Company and OMNI or its Affiliate;
provided that such terms shall include a provision by which all funds
received by the Joint Venture Company from the operation of such assets in
excess of the actual costs of operating such assets shall be paid 50% for
the account of OMNI or its Affiliate, as the case may be, and 50% for the
account of the Joint Venture Company.
ARTICLE VII
LIABILITY OF PARTIES
Section 1.b LIABILITY; INDEMNITY.
(a) Each party hereto represents, warrants and covenants with
the other parties hereto and for the benefit of any other Shareholders that
on the date hereof and at the Closing its and its Affiliates' activities by
or on behalf of or related to the Joint Venture Company and its
Subsidiaries shall not violate any applicable law, ordinance, rule or
regulation of any governmental agency or authority, incident or applicable
to its performance of this Agreement and shall indemnify, defend and hold
the Joint Venture Company, its Subsidiaries, the parties hereto, any other
Shareholders and their respective Affiliates harmless from any loss,
liability, damage, claim or expense actually incurred, arising from or
related to the failure of such party or its Affiliates to comply with any
such laws, ordinances, orders, rules or regulations.
(b) Each party hereto shall indemnify, defend and hold the Joint
Venture Company and its Subsidiaries, the other parties hereto, and any
other Shareholders and their respective Affiliates harmless against any
loss, liability, damage, claim or expense which the Joint Venture Company,
its Subsidiaries, or any other party hereto, and any other Shareholders and
their respective Affiliates may incur as a result of such party's failure
to comply with its obligations under or related to this Agreement unless
such party was acting in good faith and with reasonable care in what it
reasonably believed to be its scope of authority set forth in this
Agreement or any related agreement and in the best interests of the Joint
Venture Company.
(c) Waldman will indemnify, defend and hold harmless OMNI, OMNI
International, the Joint Venture Company and the respective officers,
directors, shareholders and Affiliates of each of the foregoing from and
against all loss, liability, damage, claim or expense which may be imposed
upon or reasonably incurred by such Person, in any way relating to or
arising out of or alleged to be attributable to, related to or arising out
of the operations of Waldman or his Affiliates, including Liderco, prior to
the Closing, including without limitation any claim, suits, actions or
proceedings by the employees of Liderco and any governmental authority.
(d) The indemnification provided by this Article 7 shall be in
addition to any other rights to which the Person entitled to
indemnification may be entitled under any agreement, as a matter of law or
otherwise, both as to an action in such Person's capacity as a Shareholder,
member of the Board of Directors or otherwise, or to any action in another
capacity, and shall continue as to any Person who has ceased to serve in
such capacity. All of the indemnification provisions contained in this
Article 7 shall survive any termination of this Agreement. The
indemnification provided in this Article 7 is for the benefit of the
Persons specified herein and their respective successors, legal
representatives and permitted assigns and shall not be deemed to create any
right to indemnification in favor of, or from, any other Person.
(e) No Person shall be denied indemnification in whole or in
part under this Article 7 because such Person had an interest in the
transaction with respect to which the indemnification applies, if the
transaction was otherwise permitted by the terms of this Agreement.
(f) All of the indemnification provided in this Article 7 shall
include reasonable attorney's fees, including expenses and court costs,
other investigative and defense expenses and reasonable settlement
payments.
(g) Promptly after receipt by a Person indemnified under any
express provision of this Agreement (the "Indemnified Party") of notice of
the commencement of any action against the Indemnified Party, such
Indemnified Party shall give notice to the Person or Persons (the
"Indemnifying Party") obligated to indemnify the Indemnified Party pursuant
to the express provisions of this Agreement. The Indemnifying Party shall
be entitled to participate in the defense of the action and, to the extent
that it may elect in its discretion by written notice to the Indemnified
Party, to assume the control and defense and/or settlement of such action;
provided, however, that: (i) the Indemnifying Party acknowledges in
writing its indemnity obligations for such matter, (ii) both the
Indemnifying Party and the Indemnified Party must consent and agree to any
settlement of any such action, except that if the Indemnifying Party has
reached a bonafide settlement agreement with the plaintiff(s) in any such
action and the Indemnified Party does not consent to such settlement
agreement, then the dollar amount specified in the settlement agreement
shall act as an absolute maximum limit on the indemnification obligation of
the Indemnifying Party, and (iii) if the defendants in any such action
(including any impleaded parties) include both the Indemnifying Party and
the Indemnified Party and if the Indemnified Party shall have been advised
by its counsel, and, if required by the Indemnifying Party, independent
counsel selected by the parties (with the costs and expenses of such
independent counsel to be paid by the Indemnifying Party unless such
independent counsel ascertains that no separate defense is available, in
which case such costs and expenses shall be paid by the Indemnified Party)
agrees with such counsel, that there are legal defenses available to it
which are in conflict with those available to the Indemnifying Party, then
the Indemnified Party shall have the right to select separate counsel to
assert such legal defenses and otherwise to participate in the defense of
such action on behalf of the Indemnified Party, and the fees and
disbursements of such separate counsel shall be included in the amount
which the Indemnified Party is entitled to recover under the terms and
subject to the conditions of this Agreement. The parties will cooperate
with each other in the defense of any such action and the relevant records
of each shall be available to the other with respect to such defense.
ARTICLE VIII
BUDGET AND ACCOUNTING
Section 1.g BUDGET. The President and the Chief Financial Officer
shall jointly prepare and submit to the Board of Directors an annual budget
and business plan for review and approval at a meeting of the Board of
Directors at least 45 days in advance of each fiscal year. The annual
budget and business plan shall consist of an annual operating budget and an
annual capital budget. The annual operating budget shall contain
management authority limits for all expenses and categories of expenses
that the President and the Chief Financial Officer believe will be required
to enable the Joint Venture Company and its Subsidiaries to discharge their
respective obligations in the coming fiscal year. The annual capital
budget shall contain estimates of Operations during the fiscal year and
projections of additional financial support, working capital or guarantees
expected to be required of the Shareholders and their Affiliates, together
with such other information as the President and the Chief Financial
Officer deem necessary or appropriate. Any expenditure made by the
President or the Chief Financial Officer on behalf of the Joint Venture
Company or any Subsidiary in amounts provided for in the annual operating
budget, as it may be revised from time to time and approved by the Board of
Directors will not require additional advance approval of the Board of
Directors.
Section 2.g JV ADMINISTRATION.
(a) General. Subject to the terms and conditions of this
Agreement, the JV Administration shall be conducted, or caused to be
conducted, by the Chief Financial Officer, subject to the direction and
supervision of the Board of Directors. OMNI, the Shareholders, the
President, the International Manager and the Chief Financial Officer shall
exchange information on a regular basis with respect to the JV
Administration. The Chief Financial Officer shall have full power and
authority to take any action and do all things on behalf of the Joint
Venture Company and any Subsidiary deemed necessary in the conduct of JV
Administration, and shall: (i) keep or cause to be kept complete and
accurate books and records with respect to the Joint Venture Company and
any Subsidiary's business in accordance with good business practices and
U.S. generally accepted accounting principles, consistently applied; (ii)
arrange for the audit of the annual financial statements of the Joint
Venture Company and its Subsidiaries and maintain the records of the Joint
Venture Company and its Subsidiaries for the required length of time as
required for statutory and tax purposes; and (iii) arrange for the
maintenance of the Joint Venture Company's and its Subsidiaries' statutory
records as required in all applicable jurisdictions and prepare and make,
or cause to be prepared and made on the Joint Venture Company's behalf, all
annual statutory filings, notices and other documents required to be filed
with any governmental authority as a result of the Operations. Except as
otherwise expressly provided in this Agreement or in a resolution of the
Board of Directors, all other aspects of financial administration (e.g.,
establishing and maintaining accounts at banks or other financial
institutions, maintaining custody of checkbooks and making disbursements,
receipt of remittances from the Operations, placement of surplus funds in
time or demand deposits and other temporary investments and foreign
exchange dealings), shall also be exercised by the Chief Financial Officer.
(b) Auditors. Arthur Andersen LLP or any other firm of
independent public accountants designated by the Board of Directors shall
be the auditors of the Joint Venture Company and its Subsidiaries and,
subject to the approval of the Board of Directors, shall take such action
as its necessary to comply with any applicable laws.
(c) Financial Statements. The Chief Financial Officer shall
prepare and deliver or cause to be prepared and delivered to OMNI and the
Shareholders:
(i) As soon as available and in any event within 45 days
after the last day of the Joint Venture Company's fiscal year, copies
of consolidated balance sheets, statements of income and earnings,
cash flow and shareholders' equity, as of the close of such fiscal
year, prepared in accordance with U.S. generally accepted accounting
principles, all in reasonable detail and stating in comparative form
the figures as of the close of and for the previous fiscal year,
accompanied by a report thereon from the Joint Venture Company's
auditors to the effect that such consolidated financial statements
present fairly, in all material respects, the financial condition of
the Joint Venture Company on a consolidated basis as of, and the
results of operations and cash flows for, the periods covered thereby,
in accordance with U.S. generally accepted accounting principles,
consistently applied, and that the examination of such auditors in
connection with such financial statements has been made in accordance
with U.S. generally accepted auditing standards and accordingly
includes such tests of the accounting records of the Joint Venture
Company and such other auditing procedures as were considered
necessary in the circumstances;
(ii) As soon as available, and in any event within 21 days
after the last day of each of the Joint Venture Company's fiscal
quarters, copies of internally prepared consolidated balance sheets
and statements of income and earnings, cash flow and shareholders'
equity of the Joint Venture Company, as of the close of and for such
fiscal quarter and, on a cumulative basis, for the fiscal year up to
the close of such fiscal quarter, prepared in accordance with U.S.
generally accepted accounting principles setting forth in comparative
form the corresponding period for the preceding fiscal year, in each
case in reasonable detail (but not including footnotes to such
unaudited consolidated financial statements) and certified as fairly
representing the financial condition of the Joint Venture Company on a
consolidated basis, subject to changes resulting from year-end
adjustments, by the Chief Financial Officer on behalf of the Joint
Venture Company;
(iii) From time to time with reasonable promptness such
other financial information of the Joint Venture Company and its
Subsidiaries including all management control letters issued by the
Joint Venture Company's auditors whether or not specifically requested
by OMNI or the Shareholders; and
(iv) Copies of all public financial pronouncements and
financial statements and reports, including tax returns and
informational reports filed with government agencies.
(d) Inspection of Records. Each Shareholder shall have the
right upon reasonable notice to inspect the books and records of the Joint
Venture Company and its Subsidiaries, which books and records shall be
maintained at the Joint Venture Company's principal place of business, and
shall be made available to representatives of all Parties during regular
business hours.
(e) Fiscal Year. The fiscal year of the Joint Venture Company
shall end on the 31st day of December in each year with the first fiscal
year to end on December 31, 1998.
ARTICLE IX
INSURANCE
Section 1.e INSURANCE. (a) The President shall cause the Joint
Venture Company and its Subsidiaries to purchase and maintain in full force
and effect all appropriate policies of insurance on its property and
equipment used in the performance of Operations, and against such risks as
are from time to time required by the Board of Directors.
(b) The President shall insure that all policies of insurance
maintained pursuant to this Article 9, including liability limits and
retention levels, shall be in such amounts as are required from time to
time by the Board of Directors and shall comply at all times with coverage
and liability limits established or required by any applicable law or as a
condition to performing any Operations being performed or for which
contracts have been awarded. All insurance coverage shall (i) be placed
with companies, and in such form, as shall be customary in the geophysical
industry, (ii) be approved from time to time by the Board of Directors,
(iii) contain provisions regarding waivers of rights of subrogation
thereunder against any assured named in such policy and any assignee of
such assured, (iv) shall name the Shareholders as additional insureds, and
(v) shall be endorsed to be primary to any other insurance of the
Shareholders. All insurance policies shall be evidenced by certificates of
insurance indicating that the policies shall not be cancelled or partially
altered without 30 days prior notice to the Joint Venture Company and each
Shareholder. The President shall promptly investigate and report to each
Shareholder, the Board of Directors and to the appropriate insurers all
accidents and claims for damage relating to the Operations.
Section 2.b RELATIONSHIP TO INDEMNIFICATION. Each party hereto agrees
that if any claim is made under any insurance policy maintained pursuant to
this Article 9 that covers any liabilities or losses also covered by the
indemnification provisions of Article 7, the Person entitled to such
indemnity shall (a) acknowledge and accept as satisfaction of any amounts
due under Article 7 the amount of any insurance proceeds reimbursed and (b)
not be entitled to enforce its rights pursuant to Article 7 otherwise until
any such claim is negotiated and settled with the Person insuring such
liability or loss; provided, that if any such liabilities or losses exceed
the amount reimbursed by insurance, such Person shall be entitled to
enforce the terms and provisions of Article 7 to recover the excess.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
Section 1.b REPRESENTATIONS AND WARRANTIES OF OMNI AND OMNI
INTERNATIONAL. In order to induce Waldman to enter into this Agreement and
take the other actions set forth in this Agreement, each of OMNI and OMNI
International represents and warrants to Waldman on the date hereof and at
the Closing as follows:
(a) Organization, Existence and Corporate Power. Each of OMNI
and OMNI International is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation. Each of OMNI and OMNI International has all
requisite power and authority and all necessary governmental and
regulatory licenses, permits and authorizations to carry on its
business as it has been and is now being conducted and to own and
lease its properties and assets used in connection therewith to
execute and deliver this Agreement and to carry out its obligations
under this Agreement except to the extent that, as to such licenses,
permits and authorizations, such failures that would not, individually
or in the aggregate, have a material adverse effect on the execution,
delivery and performance of this Agreement.
(b) Authorization and Execution. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated thereby have been duly authorized and approved by all
requisite corporate and shareholder action of OMNI and OMNI
International, and this Agreement constitutes the legal, valid and
binding obligation of each of OMNI and OMNI International enforceable
against it in accordance with its terms except to the extent that
such enforceability may be limited by bankruptcy, insolvency or other
similar laws relating to creditors' rights generally and by general
principles of equity.
(c) Conflict. Neither the execution, delivery and performance by
OMNI or OMNI International of this Agreement nor the consummation of
the transactions contemplated hereby will result in a breach of, or
constitute a default under, or conflict with, or give rise to a right
of termination of, or accelerate the performance required by (i) the
charter documents and by-laws or the equivalent thereof of either of
OMNI or OMNI International; (ii) the terms of any agreement, lease,
mortgage, indenture or other instrument to which either of OMNI or
OMNI International is a party or by which it or any of its
Affiliates is bound; or (iii) any judgment, decree order or award of
any court, governmental body or arbitrator, or any law, rule or
regulation applicable to either of OMNI or OMNI International or its
property or assets, except for violations, conflicts or defaults that
would not, individually or in the aggregate, have a material adverse
effect on the execution, delivery and performance of this Agreement,
in the case of the clauses (ii) and (iii) above.
(d) Consent. Neither the execution, delivery and performance by
OMNI or OMNI International of this Agreement nor the consummation of
the transactions contemplated hereby requires any registration with,
consent of approval of, or notice to, or other action to, with or by,
any governmental authority or regulatory body or any other Person.
Section 2.d REPRESENTATIONS AND WARRANTIES OF WALDMAN. In order to
induce OMNI and OMNI International to enter into this Agreement and take
the other actions set forth in this Agreement, Waldman warrants and
represents to each of OMNI and OMNI International on the date hereof and at
the Closing as follows:
(a) Authorization; Execution and Enforceability. Waldman has the
full legal right, power and authority to execute deliver and perform
this Agreement and the other agreements, instruments or documents to
be executed pursuant to this Agreement (the "Related Agreements") and
to consummate the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Waldman and
constitutes, and the Related Agreements to be executed by Waldman in
connection with the transactions contemplated hereby when executed
will be duly executed and delivered and will constitute, the legal,
valid and binding obligations of Waldman enforceable against Waldman
in accordance with their respective terms except to the extent that
such enforceability may be limited by bankruptcy, insolvency or other
similar laws relating to creditors' rights generally and by general
principles of equity.
(b) Conflict. Neither the execution, delivery and performance by
Waldman of this Agreement or any Related Agreements nor the
consummation of the transactions contemplated hereby or thereby will
result in a breach of, or constitute a default under, or conflict
with, or give rise to a right of termination of, or accelerate the
performance required by (i) the terms of any agreement, lease,
mortgage, indenture or other instrument to which Waldman is a party
or by which Waldman, any of his Affiliates, the property or assets of
any of the foregoing, the Assets or the Contracts are bound or (ii)
any judgment, decree order or award of any court, governmental body or
arbitrator, or any law, rule or regulation applicable to Waldman, any
of his Affiliates, the property or assets of any of the foregoing, the
Assets or the Contracts, except for violations, conflicts or defaults
that would not, individually or in the aggregate, have a material
adverse effect on the execution, delivery and performance of this
Agreement and the Related Agreements.
(c) Consent. Neither the execution, delivery and performance by
Waldman of this Agreement, the Related Agreements nor the consummation
of the transactions contemplated hereby or thereby requires any
registration with, consent of approval of, or notice to, or other
action to, with or by, any governmental authority or regulatory body
or any other Person.
(d) Investment. Waldman hereby makes the following
representations with respect to any shares of OMNI Common Stock that
may be issued to Waldman pursuant to this Agreement (collectively, the
"Restricted Securities").
(i) Waldman is acquiring the Restricted Securities for
investment for his own account and not with a view to, or for sale or
other disposition in connection with, any distribution of all or any
part thereof except (i) in an offering covered by a registration
statement filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), covering
the Restricted Securities or (ii) pursuant to an applicable exemption
under the Securities Act. In receiving the Restricted Securities,
Waldman is not offering or selling, and will not offer and sell, for
OMNI in connection with any distribution of such OMNI Common Stock,
and Waldman does not have any contract, undertaking, agreement or
arrangement with any person for the distribution of the Restricted
Securities and will not participate in any undertaking or in any
underwriting of such an undertaking except in compliance with
applicable law.
(ii) Waldman represents that he is an "accredited investor"
as that term is defined in Regulation D under the Securities Act and
that he is able to fend for himself and can bear the economic risk of
his investment in the Restricted Securities.
(iii) Waldman has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and
risks of an investment in the Restricted Securities.
(iv) Waldman has also been afforded access to information
about OMNI and OMNI's financial position, results of operation,
business, property and management sufficient to enable him to evaluate
an investment in the Restricted Securities, and has had the
opportunity to ask questions of and has received satisfactory answers
from OMNI concerning the foregoing matters.
(v) Waldman understands that the Restricted Securities
acquired pursuant hereto has been registered under the Securities Act
on the basis that all sales provided for in this Agreement are exempt
from registration under the Securities Act, and that OMNI's reliance
on such exemption is based, in part, upon Waldman's representations
set forth herein.
(vi) Waldman understands that the Restricted Securities will
not be registered under the Securities Act, that such shares will be
"restricted securities" as that term is defined in Rule 144
promulgated by the Securities and Exchange Commission under the
Securities Act, and that Waldman cannot transfer such shares unless
they are subsequently registered under the Securities Act and under
any applicable state securities law or are transferred in a transfer
that, in the opinion of counsel satisfactory to OMNI, is exempt from
such registration. Waldman further understands that OMNI will, as a
condition to the transfer of any such shares, require that the request
for transfer be accompanied by an opinion of counsel, in form and
substance satisfactory to OMNI, to the effect that the proposed
transfer does not result in a violation of the Securities Act or any
applicable state securities law, unless such transfer is covered by an
effective registration statement. Waldman understands that the
Restricted Securities may not be sold publicly in reliance on the
exemption from registration under the Securities Act afforded by Rule
144 unless and until the minimum holding period (currently one year)
and other requirements of Rule 144 have been satisfied.
(vii) Waldman understands and agrees that all certificates
evidencing the Restricted Securities issued hereunder will bear
restrictive legends in substantially the following form:
The securities represented by this
certificate have not been registered under
the Securities Act of 1933, as amended (the
"Act"), or any applicable state law, and may
not be transferred without registration under
the Act and any such state law or an opinion
of counsel satisfactory to the corporation
that registration is not required.
ARTICLE XI
TRANSFER RESTRICTION
Section 1.d NO TRANSFER. Except as expressly provided in this Article
11, no Shareholder shall offer, transfer, sell, assign, give, pledge,
hypothecate or otherwise dispose of or grant a security interest in or
encumber, whether voluntarily, involuntarily or by operation of law, or
take any action that effects or may effect all or any part of the foregoing
(a "Transfer"), any Shares owned by it or any legal or beneficial interest
therein. Neither the foregoing sentence nor any provision of this
Agreement shall be construed to prevent (and the parties hereto hereby
expressly approve of) (i) the Transfer of any or all Shares owned by a
Shareholder to an Affiliate of such Shareholder; provided that the
Shareholder making such assignment shall nevertheless remain jointly and
severally liable for all of its obligations under this Agreement and the
Affiliate to whom the Shares were transferred shall assume all of the
terms, conditions, provisions and obligations under this Agreement by
executing a counterpart hereof evidencing its acceptance of, and agreeing
to be bound by, the terms and conditions of this Agreement; (ii) any pledge
of Shares owned of record or beneficially by OMNI in order to secure
indebtedness of OMNI or any of its Affiliates; or (iii) any pledge of
Shares owned by Waldman or a Waldman Transferee to secure indebtedness of
Waldman or such Waldman Transferee specifically incurred to fund a
subscription for Shares pursuant to Section 4.4 hereof; provided that (A)
the loan secured by such a pledge is advanced by a financial institution
approved by the Board of Directors and (B) the Board of Directors approves
the terms of the loan and pledge, which shall specifically include
provisions granting OMNI International or OMNI Transferees a right of first
refusal with respect to any Transfer by the financial institution of the
Shares so pledged.
Section 2.d AUCTION. (a) At any time during the term of this
Agreement, any Shareholder (the "Offeror") shall have the right to offer to
buy all, but not less than all, of the Shares owned by the other
Shareholder (an "Offer"). The Offer shall be in writing and set forth the
price per Share the Offeror will pay for such Shares, which must be paid in
cash.
(b) Upon receipt of an Offer, the non-Offering Shareholder shall
have 30 days within which he may (i) accept the Offer and agree to sell his
Shares to the Offeror in accordance with the Offer or (ii) give written
notice to the Offeror that the non-Offering Shareholder desires to purchase
the Shares owned by the Offeror for an amount higher than set forth in the
Offer (the "Counter Offer"). If the Offeror does not receive written
notice of the non-Offering Shareholder's decision within such 30-day
period, the non-Offering Shareholder will be deemed for purposes of this
Section 11.2 to have accepted the Offer.
(c) If the non-Offering Shareholder accepts the Offer, the
Offeror shall have 30 days from the actual or deemed notice of acceptance
of the non-Offering Shareholder to purchase the non-Offering Shareholder's
Shares in accordance with the terms of the Offer. By accepting the Offer,
the non-Offering Shareholder agrees to execute and deliver or cause to be
executed and delivered any and all documents, instruments and agreements to
transfer to the Offeror good, valid and marketable title to such
Shareholder's Shares, free and clear of any and all liens, claims or
encumbrances of any kind.
(d) If the non-Offering Party submits a Counter Offer, the
Offeror hereby agrees to sell its Shares for the price and upon the terms
set forth in the Counter Offer and to execute and deliver or cause to be
executed and delivered any and all documents, instruments and agreements
that may be necessary to transfer good, valid and marketable title to the
Offeror's Shares, free and clear of any liens, claims or encumbrances of
any kind.
(e) If a Counter Offer is made but the purchase of the Offeror's
Shares is not completed within 30 days of notice of the Counter Offer, the
Counter Offer will be deemed not to have been made and the non-Offering
Shareholder will be deemed to have accepted the Offer; provided that the
failure to purchase the Shares is not the result of the breach by the
Offeror of Section 11.2(d) hereof, in which case the time for completing
the purchase shall be extended until such breach is cured.
Section 3.e PURCHASE OF WALDMAN SHARES. (a) If at anytime prior to
the second anniversary of the Closing the Employment Agreement is
terminated pursuant to Section 6(a)(i) thereof, then OMNI, any OMNI
Transferee or any Affiliate of either of the foregoing may, at its option,
acquire all Shares owned by Waldman and any Waldman Transferees for USD
$50,000 for each 1% of the total outstanding Shares that the Shares to be
acquired represent. If OMNI or one of its Affiliates desires to exercise
the option granted by this Section 11.3(a), it shall deliver notice of such
desire to Waldman and/or the Waldman Transferees within 30 days of
termination of the Employment Agreement and pay for such Shares within 45
days of such termination by wire transfer of immediately available funds in
U.S. dollars.
(b) Waldman shall, and shall cause any Waldman Transferee, upon
the exercise of any option granted pursuant to this Section 11.3 with
respect to all Shares owned by Waldman and the Waldman Transferees, to
execute and deliver any and all documents, instruments and agreements that
may be necessary to transfer good, valid and marketable title to the Shares
to be acquired, free and clear of all liens, claims and encumbrances of any
kind and take such further actions as OMNI or the OMNI Transferee may
reasonably request, including terminating the Employment Agreement without
further cost to the Joint Venture Company and resigning, and causing his
nominees to resign, from the Board of Directors.
Section 4.b RIGHT OF FIRST REFUSAL. (a) From and after the fifth
anniversary of the Closing, Waldman or a Waldman Transferee (the "Selling
Shareholder") may transfer all, but not less than all, of its Shares if it
has received a bona fide offer for such Shares but only after such Shares
shall first have been offered for sale to OMNI and the Joint Venture
Company as hereinafter provided; provided, however, that in no event may
Waldman or a Waldman Transferee Transfer Shares or any interest therein to
a competitor or customer of the Joint Venture Company.
(b) Prior to any such Transfer of any Shares or any interest
therein by the Selling Shareholder, the Selling Shareholder shall first
address to OMNI and the Joint Venture Company a Notice of Right of First
Refusal, which shall identify the person to whom such Shares are proposed
to be transferred and which shall constitute a written offer to sell such
Shares (the "Offered Shares") to OMNI and the Joint Venture Company at the
per share price being offered by the Third Party for the Offered Shares
(the "Offered Price"). The date that OMNI receives the Notice of Right of
First Refusal shall be referred to herein as the "First Refusal Notice
Date."
(c) For a period of 30 days from the First Refusal Notice Date,
OMNI shall have the sole and exclusive option to acquire all or any portion
of the Offered Shares at the Offered Price. OMNI shall be entitled to give
written notice to the Selling Shareholder and to the Joint Venture Company
within 30 days from the First Refusal Notice Date of its election to
acquire all or any part of such Offered Shares. Such notice shall refer to
the Notice of Right of First Refusal and shall set forth the number of
Offered Shares to be acquired by OMNI.
(d) From the thirty-first day to the fiftieth day following the
First Refusal Notice Date, the Joint Venture Company shall have an
exclusive option to acquire all but not less than all of the Offered Shares
that have not been allocated to OMNI pursuant to Section 11.4(c). The
Joint Venture Company may exercise such option by giving written notice of
exercise to the Selling Shareholder and to OMNI, prior to the termination
of its exclusive option period. Such notice of exercise shall refer to the
Notice of Right of First Refusal and shall set forth the number of shares
to be acquired by the Joint Venture Company.
(e) The consummation of any Transfer required pursuant to any
and all elections to acquire Offered Shares pursuant to this Section 11.4
shall constitute the "Share Closing." No Share Closing shall occur and no
Transfer to OMNI or the Joint Venture Company shall occur pursuant to this
Section 11.4 unless OMNI or the Joint Venture Company or both of them
together have elected to acquire and do in fact acquire all Offered Shares.
The Share Closing shall be held at the principal office of OMNI at such
time and on such date as the Selling Shareholder on the one hand and OMNI
and the Company on the other hand, shall agree, but in no event later than
the sixtieth day following the First Refusal Notice Date.
(f) At the Closing, the Selling Shareholder shall deliver good
and marketable title to all of the Offered Shares to be sold and
certificates in proper form for transfer representing all of such Offered
Shares. Upon receipt of proper tender of the Offered Shares, each of OMNI
and the Joint Venture Company, as appropriate, who have elected to acquire
Offered Shares shall pay to the Selling Shareholder such purchaser's
proportionate part (based upon the number of Offered Shares to be acquired
by such purchaser) of the Offered Price attributable to the Offered Shares
to be sold, which shall be paid, in the form of cash (by completed wire
transfer or certified check).
(g) If a person that elects to acquire Offered Shares defaults
in tendering the aforementioned consideration at the Closing, any other
person who has elected to acquire Offered Shares, but who has not so
defaulted, may purchase the Offered Shares subject to such default by
tendering to the Selling Shareholder the aforementioned consideration for
such Offered Shares no later than the business day following the day set
for the Closing. If no such person elects to acquire such defaulted Shares
so that all Offered Shares are not acquired at the Closing, no Closing
shall occur.
(h) If all of the Offered Shares have not been acquired by or on
behalf of the Joint Venture Company or OMNI prior to the sixty-fifth day
subsequent to the First Refusal Notice Date, the Selling Shareholder may,
at any time during the ensuing 20 days, transfer to the transferee
identified in the Notice of Right of First Refusal, on the same terms and
conditions and for the same price set forth in the bona fide offer for such
shares by such transferee, any of such Offered Shares that have not been so
acquired; provided, however, that unless waived by OMNI the transferee or
transferees of such Shares must execute a written acknowledgment that he or
they have become Shareholders as if he or they had been original signatory
parties to this Agreement and that he or they agree to be bound by the
terms hereof. Under no circumstances may any such unpurchased Offered
Shares be transferred to any person other than such transferee, or after
the expiration of such 20-day period, unless and until they have been
reoffered to OMNI and the Joint Venture Company in the manner provided in
this Section 11.4.
ARTICLE XII
TERMINATION
Section 1.h TERMINATION OF AGREEMENT. This Agreement shall be
terminated on the earlier to occur of the following events (each a
"Liquidating Event"), unless such Liquidating Event (other than a
Liquidating Event described in subparagraphs (a), (b) or (e)) is waived by
the party whose actions did not cause the Liquidating Event in the case of
subparagraphs (c) and (d), or is waived by OMNI or the OMNI Transferees in
the case of subparagraphs (f) or (g):
(a) The merger, consolidation, reorganization, exchange or other
business combination transaction of the Joint Venture Company in which
the Joint Venture Company is not the surviving Person;
(b) The mutual agreement of the parties hereto;
(c) A party hereto breaches any material term, provision or
condition of this Agreement, the Articles of Association or Memorandum
of Association or fails to perform any material obligation required to
be performed by it hereunder or thereunder; provided that such breach
or failure to perform shall not have been remedied or corrected within
thirty days from the date of written notice thereof by such party or
any other person; provided further that if the failure is other than
the payment of money and is of such nature that it can be corrected
but not within the applicable period, such failure shall not
constitute a Liquidating Event so long as the party receiving said
notice institutes curative action within the applicable period and
diligently pursues such action to completion;
(d) The appointment of a trustee or receiver of all or any such
substantial part of the assets or property of any party hereto; the
insolvency or bankruptcy of any party; any party makes a general
assignment for the benefit of its creditors; the attachment of a
substantial portion of the assets of any party; or the dissolution or
liquidation or winding-up of any party; provided that if any such
event is involuntary, such event shall not constitute a Liquidating
Event so long as such event shall have been corrected by the affected
party within 90 days from the date of such event;
(e) The acquisition by any party of beneficial ownership of all
of the outstanding Shares.
(f) Any termination of the Employment Agreement pursuant to
Section 6(a)(i) thereof or the failure to renew or extend the
Employment Agreement prior to the end of its initial term.
(g) Any Transfer of the Shares owned by Waldman or a Waldman
Transferee pursuant to Section 11.4 hereof.
Section 2.g RESULT OF TERMINATION. (a) Upon the occurrence of a
Liquidating Event, all provisions of this Agreement, other than this
Article 12, Article 11, Article 7 and Sections 3.4, 15.1, 15.5, 15.6 and
15.7 hereof shall have no further force or effect except as otherwise
expressly set forth herein and except with respect to any contract or
Operations theretofore awarded to the Joint Venture Company or any of its
respective Subsidiaries and not completed. The termination of this
Agreement, however, shall not in any way operate to impair or destroy any
of the rights or remedies of any party hereto or to relieve any party
hereto of its obligations to comply with any of the provisions of this
Agreement that shall have accrued hereunder prior to the effective date of
termination.
(b) Upon any termination of this Agreement or at such time as
OMNI and its Affiliates collectively own less than 50% of the outstanding
Shares, Waldman, his Affiliates and all Waldman Transferees will take or
cause to be taken all necessary steps on an orderly basis to cease using
and to immediately change the trade name and official name of the Joint
Venture Company to exclude the word "OMNI" from the Joint Venture Company's
trade name and official name and to otherwise cease using all references to
the word "OMNI" in connection with his and its Joint Venture Company's
business operations. Such name change shall be made on all stationery and
letterhead, sales literature, signs and any and all other items or
communication which identify the Joint Venture Company and its business.
It is the intent of the parties hereto that no goodwill associated with the
use of the above name is to accrue to the benefit of the Joint Venture
Company, but instead is to accrue to the benefit of OMNI and each party
hereto agrees to execute and deliver any documents or agreements as
reasonably necessary to confirm the foregoing intent as OMNI shall
reasonably request from time to time. Upon any termination of the Joint
Venture Company or at such time as OMNI and its Affiliates collectively own
less than 50% of the outstanding Shares, any license or agreement,
including registered user licenses, pertaining to the use of the term
"OMNI," or any prefix or suffix thereof, as applicable, that arise as a
result of this Agreement, the Memorandum of Association or Articles of
Association will also cease to be effective and shall automatically
terminate unless OMNI or any successor thereto, as applicable, expressly
indicates otherwise in writing.
Section 3.b DISSOLUTION OF THE JOINT VENTURE COMPANY. (a) Upon the
occurrence of a Liquidating Event described in either Section 12.1(c) or
12.1(d) that is not waived by the party who is entitled to waive such
Liquidating Event, the Joint Venture Company and its Subsidiaries will be
promptly dissolved and liquidated in accordance with the terms hereof, the
Articles of Association, Memorandum of Association and applicable law,
unless OMNI or any OMNI Transferee exercises the option granted to it
pursuant to Section 11.3. The parties shall cooperate to ensure that all
contracts entered into by the Joint Venture Company (or any Subsidiary
thereof) prior to the Liquidating Event shall be duly completed subject to
such arrangements to which the parties may mutually agree.
(b) Upon any liquidation of the Joint Venture Company pursuant
to Section 12.3(a), a committee (the "Committee"), consisting of one member
appointed by Waldman (or Waldman Transferees) and two members appointed by
OMNI (or OMNI Transferees) and two members unanimously selected by those
members appointed by Waldman and OMNI (or their respective Transferees),
shall take all actions necessary or appropriate to wind up and dissolve the
Joint Venture Company in accordance with applicable law, including meeting
all of its contractual obligations, discharging all of its liabilities or
making provision for payment thereof and distributing its net assets, if
any, to the Shareholders. The Company shall act as liquidator of the
Company in disposing of and distributing the assets of the Joint Venture
Company and shall have all of the power and authority necessary or
advisable to dissolve, liquidate and wind up the affairs of the Joint
Venture Company.
ARTICLE XIII
ADDITIONAL COVENANTS OF THE PARTIES
Section 1.b PAYMENT OF OBLIGATIONS. Each party hereto will pay and
discharge, at or before maturity, all of its obligations and liabilities
(including, without limitation, tax liabilities), except those that may be
contested in good faith and by appropriate proceedings.
Section 2.b CORPORATE EXISTENCE. Each party hereto will maintain, if
appropriate, (a) its corporate existence, its qualification to do business
and its good standing in each jurisdiction in which qualification is
necessary for the proper conduct of its businesses, (b) all licenses,
permits and other authorizations necessary for the ownership and operation
of its properties and business, and (c) insurance on all of its property,
assets, and businesses in at least such amounts and against at least such
risks as are usually insured against in the same area by companies of
established repute engaged in the same or a similar business.
Section 3.b COMPLIANCE WITH LAWS. Each party hereto will comply, in
all material respects, with all applicable laws, ordinances, rules,
regulations and requirements of governmental authorities except where the
necessity of compliance therewith is being contested in good faith and by
appropriate proceedings.
Section 4.b NOTICE OF LIQUIDATION EVENT. Upon the occurrence of a
Liquidation Event, each party hereto immediately after becoming aware
thereof, will give written notice thereof to the other party, specifying
such Liquidating Event and what action the party is taking or proposing to
take with respect thereto.
ARTICLE XIV
LIMITATION OF LIABILITY
Notwithstanding any other provision of this Agreement, neither party
hereto shall be liable to the Joint Venture Company or the other party
hereto under this Agreement for loss of use, loss of profits, increased
overhead or for any consequential, indirect, special, or incidental loss or
liability of such other party in any way relating, arising out of or based
upon a breach of any of the representations, warranties, covenants, or
agreements made to such other party, in this Agreement, whether based on
contract, tort (including negligence), strict liability or any other theory
of law or equity.
ARTICLE XV
MISCELLANEOUS
Section 1.b CONFIDENTIALITY. Each party hereto covenants and agrees,
and each party hereto shall cause its Affiliates, directors, officers,
employees, agents, representatives and other Persons associated with such
Person to covenant and agree, that all information heretofore or hereafter
disclosed to any other party hereto in connection with the negotiation,
execution or performance of this Agreement, any agreement provided for
herein or the transactions contemplated herein or in connection with the
establishment, capitalization, support, management, operation or
termination of the Joint Venture Company shall be kept strictly
confidential and shall not be disclosed to any Person or used by a party
hereto for any purpose whatsoever other than the conduct of the Operations;
provided, however, that any Person may disclose (i) the existence of this
Agreement and the Joint Venture Company and general terms and conditions
regarding the Operations and the territorial limits and exclusive nature of
this Agreement and the Joint Venture Company; (ii) information generally
available to the public other than as a result of disclosure in violation
of this Agreement; (iii) information that is available to a Person on a
non-confidential basis from an independent source; (iv) information that
has been acquired or developed independently by such Person without
violating this Agreement and (v) information required to be disclosed by
such Person under applicable law. Each party hereto shall use the same
care and discretion to avoid disclosure, publication, misuse, espionage,
loss or theft of Confidential Information as it applies to such Person's
most sensitive information. Each party hereto shall use any such
Confidential Information solely for the purposes of this Agreement and the
Joint Venture Company and shall restrict access to Confidential Information
only to those of its employees who need to know such Confidential
Information for the purposes of this Agreement or the Joint Venture
Company. For purposes of this Agreement, the terms of this Section 15.1
shall survive the termination of this Agreement and any termination or
dissolution of the Joint Venture Company.
Section 2.b TRANSLATIONS. This Agreement may be translated into one
or more languages, but the English version of this Agreement shall be
determinative of, and otherwise control, the meaning and interpretation of
the terms and conditions of this Agreement irrespective of subsequent
translations and reliance by the Parties on such translations.
Section 3.b CONFLICTS. If the provisions of the Articles of
Association or Memorandum of Association conflict with or deviate from the
provisions of this Agreement, the provisions of this Agreement shall, as
between the parties hereto (which shall, for the avoidance of any doubt,
exclude the Joint Venture Company), prevail. The parties hereto shall
exercise all voting and other rights and powers available to them so as to
give effect to the provisions of this Agreement and shall further (if
necessary) approve any required amendment to the Memorandum of Association
or Articles of Association.
Section 4.b FURTHER ASSURANCES. The parties hereto shall use their
best efforts and act in good faith to take any and all actions and to
execute and deliver or file any and all documents that may be necessary or
advisable to effectuate the provisions and purposes of this Agreement and
the Joint Venture Company. The parties hereto shall refrain from taking
any direct or indirect action that is inconsistent with the terms of this
Agreement. If this Agreement, the Articles of Association or Memorandum of
Association permit a Person to take or demand a specified action
unilaterally, each other party hereto agrees to execute all such
instruments and take all such further steps, including casting votes in its
capacity as a holder of an ownership interest in the Joint Venture Company
and causing those individuals that it has designated as members of the
Board of Directors (subject to applicable law) to cast votes, as may be
necessary to consummate or implement such action in compliance with
applicable law.
Section 5.b CHOICE OF LAW. The validity of this Agreement, the
construction of its terms and the determination of the rights and duties of
the parties shall be governed by and construed in accordance with the
substantive laws of the State of Louisiana, United States of America,
without regard to the conflicts of law provisions of such state.
Section 6.b ARBITRATION. (a) It is agreed that in case any dispute,
disagreement, controversy or claim arises out of or in relation to this
Agreement or with respect to a breach of this Agreement, the parties hereto
shall seek to solve the matter amicably through discussions between the
parties. If the parties fail to resolve such controversy, claim or breach,
any party may seek arbitration as set forth below.
(b) Any dispute, disagreement, controversy or claim arising out
of or in relation of this Agreement that has not been resolved in
accordance with Section 15.6(a) hereof, or breach hereof, shall be finally
settled by arbitration which shall be conducted in London, England in
accordance with the following provisions:
(i) The arbitration shall be conducted before three
arbitrators in accordance with the Rules of Arbitration and
Conciliation of the International Chamber of Commerce then in effect.
(ii) Each party hereto shall be entitled to appoint one
arbitrator within 30 days after receipt of a demand for arbitration.
Said arbitrators shall be freely selected, and neither party shall be
limited to any prescribed list, although the arbitrators shall be
generally familiar with the onshore geophysical industry. The two
arbitrators thus appointed shall, within 30 days after both shall
have been appointed, appoint a third arbitrator, who shall not be a
citizen of Bolivia or the United States of America and who shall
preside over the arbitration proceedings.
(iii) If any appointment required herein shall not be made
within the prescribed time, then such appointment shall be made by the
President of the International Chamber of Commerce in London, England.
(iv) The proceedings shall be conducted in English, and all
arbitrators shall be conversant in and have a thorough command of the
English language.
(v) The decision of the arbitrators shall be set forth in a
written opinion, which shall set forth the arbitrators' findings of
fact and conclusions of law. If the arbitrators shall render any
monetary award to a Person, such award shall be payable in United
States dollars.
(vi) Each party hereto shall bear its own costs and expenses
in connection with arbitration and shall bear one-half of the cost of
the arbitration proceedings; provided, however, that the arbitrators
shall have the authority to award the costs of arbitration, including
legal fees and other expenses, to any party in connection with
rendering a decision on any dispute resolved pursuant to this Section
15.6(b).
(vii) The award of the arbitrators shall be final and
conclusive. Each party shall be bound by the award rendered by the
arbitrators and judgment thereon may be entered into any court having
jurisdiction over this Agreement pursuant to Section 15.6(b)(ix)
hereof.
(viii) Notwithstanding any other provision of this
Agreement, any party shall be entitled to seek preliminary injunctive
relief from any court having jurisdiction over this Agreement pursuant
to Section 15.6(b)(ix) pending the final decision or award of the
arbitrators.
(ix) Any process against a party hereto or any other Person
subject to this Agreement in, or in connection with, any suit, action
or proceeding arising out of or relating to this Agreement or any of
the transactions contemplated hereby may be served personally or by
certified mail at the address set forth in Section 15.7 hereof with
the same effect as served on it or him personally. Each party hereto
and any other Person subject to this Agreement hereby irrevocably
submits in any suit, action or proceeding arising out of or relating
to this Agreement or any of the transactions contemplated herein to
the jurisdiction and venue of the United States District Court for the
Western District of Louisiana; provided, however, that if jurisdiction
and/or venue are not proper in the United States District Court for
the Western District of Louisiana, the parties hereto and any other
Person subject to this Agreement hereby irrevocably submit in any
suit, action or proceeding arising out of or relating to this
Agreement or any of the transactions contemplated by this Agreement to
the jurisdiction and venue of any court of the State of Louisiana
located in Lafayette Parish. The parties hereto and all other Persons
subject to this Agreement hereby waive any and all objections to
jurisdiction and review or venue that it may have under any applicable
law and agrees to the personal jurisdiction of the courts named
herein. OMNI International hereby appoints OMNI as its agent for
service of process in such jurisdiction and Waldman hereby appoints
Patrick Singley (or any successor thereto) as his agent for service of
process in such jurisdiction.
Section 7.b NOTICES. All notices or reports which may be given to a
party under any provision of this Agreement shall be in writing in English
and deemed to have been duly given when served (i) by facsimile or other
written electronic means of communication confirmed by registered airmail,
(ii) personally or (iii) certified or registered airmail, return receipt
requested, postage prepaid and properly addressed to the party at its
address set forth below or to such other address as such party may
designate in writing to the other parties:
If to OMNI or OMNI International:
c/o OMNI Energy Services Corp.
4500 NE Evangeline Thruway
Carencro, Louisiana 70520
Facsimile: 318-896-6655
Attention: Chief Executive Officer
If to Waldman:
Edwin Waldman Attie
P. O. Box 3319
Santa Cruz, Bolivia
Facsimile: 011-591-3-429413
Section 8.b LEGEND. Any certificates representing Shares shall
contain the following legend endorsed thereon:
The Shares in OMNI International Energy Services-South
America, Ltd. represented by this certificate are subject to
the terms of the Joint Venture Agreement effective as of
July 1, 1998, by and among OMNI Energy Services Corp., OMNI
International Energy Services, Ltd. and Edwin Waldman Attie,
a copy of which is on file at the principal executive office
of OMNI International Energy Services-South America, Ltd.,
as the same may be amended from time to time, which
restricts the transferability of the Shares represented
hereby or any legal or beneficial interest therein.
Section 9.b EXCLUSIVE BENEFITS. No provision in this Agreement and no
reference to any contracts, agreements or instruments made herein or
therein shall be deemed to ratify or create any rights or benefits in favor
of any Person other than the parties hereto and their Affiliates, including
members of the Board of Directors.
Section 10.b ASSIGNMENT. Except as set forth in this Agreement or the
Articles of Association, neither the rights nor the obligations of any
party hereto in and to the Joint Venture Company or under this Agreement
shall be assigned or otherwise transferred, assigned, pledged or
hypothecated by any party in whole or in part without the express prior
written consent of the other parties hereto. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns and transferees.
Section 11.b REMEDIES. No remedy of the parties hereunder shall be
exclusive of any other remedy provided herein or provided by law, but each
shall be cumulative and in addition to each and every other remedy. Waiver
of a default shall not be a waiver of any other or subsequent default.
Section 12.b BREACH OF AGREEMENT. Each of the parties hereto shall be
entitled to injunctive relief under this Agreement if any other party
hereto shall breach or threaten to breach any of the terms hereof. Nothing
contained in this Section 15.12 shall be construed to limit the obligation
of the parties to submit disputes to arbitration or to limit the finality
of an arbitration award made pursuant to Section 15.6 hereof.
Section 13.b MODIFICATION. This Agreement may not be amended or
modified at any time except by an instrument in writing executed by each
party hereto or its duly authorized officer.
Section 14.b WAIVER. The failure by any party hereto to insist upon
strict performance of any provision or enforce any of its rights hereunder
shall not be deemed to be a waiver of, or estoppel against, assertion of
the right to require such performance, unless such waiver is an express
written waiver which has been signed by the waiving party. Waiver of any
one breach, or estoppel, in one case or instant shall not be deemed to
constitute or imply a waiver of any other breach, or estoppel, with respect
to any other case or instance, whether of similar nature or otherwise.
Section 15.b INVALID PROVISIONS. If any provision of this Agreement
is held to be illegal, invalid, or unenforceable under present or future
laws of the United States of America or any state therein or any other
nation, country, or possession, or by any court, agency or other
governmental authority therein effective during the term, including
renewals, of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; and
the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of
each such illegal, invalid, or unenforceable provision there shall be added
automatically as part of this Agreement a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be possible and
be legal, valid, and enforceable.
Section 16.b ENTIRE AGREEMENT. This Agreement (including instruments,
documents, agreements, schedules, and exhibits delivered pursuant hereto or
thereto) constitutes the entire understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior
agreements or understandings, if any (including the Letter of Intent
between OMNI and Waldman dated as of June 12, 1998), relating to the
subject matter hereof.
Section 17.b MULTIPLE COUNTERPARTS. This Agreement may be executed in
a number of identical counterparts, each of which for all purposes shall be
deemed an original, and all of which constitute collectively, one
agreement; but in making proof of this Agreement, it shall not be necessary
to produce or account for more than one such counterpart.
Section 18.b HEADINGS; GENDER. The headings in this Agreement are for
the purpose of reference only and shall not limit or otherwise affect any
of the meanings or interpretations of this Agreement. all words used
herein, regardless of the number and gender specifically used, shall be
deemed and construed to include any other number, singular or plural, and
any other gender masculine, feminine or neuter as the context requires.
Section 19.b EXPENSES. Each party shall pay its own legal and other
costs incurred in negotiating, preparing and executing this Agreement, and
the Joint Venture Company shall not incur any legal and other costs
incurred by any other party in negotiating, preparing and executing this
Agreement, except those costs, fees and expenses directly attributable to
its incorporation.
Section 20.b KILN AGREEMENT. At the Closing Waldman and the Joint
Venture Company shall enter into the letter agreement in the form attached
hereto as Exhibit J.
Section 21.b CLOSING ADJUSTMENTS. (a) At the Closing, OMNI and
Waldman shall deliver and execute a settlement statement that shall set
forth all adjustments necessary to provide the Joint Venture Company with
the economic benefits and burdens of the conduct of Waldman's Business by
Waldman from and after July 1, 1998 and the resulting settlement amount,
which shall be reflected as an amount owing to Mr. Waldman by the Joint
Venture Company or an amount owing to the Joint Venture Company by Mr.
Waldman. All such adjustments shall be calculated using the best
information available as of a date or dates immediately prior to the
Closing Date. Adjustments pursuant to this Section 15.21 shall include:
(i) Revenue received or accrued by Waldman or his Affiliates
that are attributable to Waldman's Business from and after July 1,
1998,
(ii) Expenses paid or accrued by Waldman or his Affiliates
that are attributable to Waldman's Business from and after July 1,
1998, and
(iii) The difference between the balances on the Closing
Date of accounts receivable and accounts payable attributable to
Waldman's Business and which arose from and after July 1, 1998.
All adjustments shall be calculated in accordance with U.S. generally
accepted accounting principles.
(b) As soon as practicable after the Closing, OMNI shall prepare
and deliver to Waldman a statement (the "Final Settlement Statement")
setting forth each adjustment necessary to provide the Joint Venture
Company with the economic benefits and burdens of the conduct of Waldman's
Business from and after July 1, 1998 that was not finally determined as of
the Closing. As soon as practicable after receipt of the Final Settlement
Statement, Waldman shall deliver to OMNI a report containing any changes
that Waldman proposes to be made to the preliminary Final Settlement
Statement. OMNI and Waldman undertake to agree with respect to the amounts
due pursuant to such post-Closing adjustments and to make any payment
necessary thereunder no later than 60 days after the Closing Date.
IN WITNESS WHEREOF, each of the respective parties hereto have caused
this Agreement to be signed by itself or its duly authorized representative
as of the day and year first above written.
OMNI ENERGY SERVICES CORP.
By: /s/ ROGER E. THOMAS
----------------------
Roger E. Thomas
President
OMNI INTERNATIONAL ENERGY SERVICES, LTD.
By: /s/ ROGER E. THOMAS
-----------------------
Roger E. Thomas
/S/ EDWIN WALDMAN ATTIE
-----------------------
Edwin Waldman Attie
- 1 -
<PAGE>
Exhibit "A"
DEFINITIONS
In addition to the terms defined in the Joint Venture Agreement
effective as of July 1, 1998 (the "Agreement"), by and among OMNI Energy
Services Corp., OMNI International Energy Services, Ltd. ("OMNI
International") and Edwin Waldman Attie ("Waldman"), to which this is
attached, the following terms, unless the context requires otherwise, shall
have the meanings specified or referred to below for all purposes of the
Agreement.
"Affiliate" shall mean, (i) with respect to any natural person,
such natural person's spouse, children, grandchildren of any other
relative of such natural person who shares the same home as the
natural person in question (each a "Relative") and any other Person
directly or indirectly, controlling, controlled by, or under common
control with, such natural person or a Relative thereof and (ii) with
respect to any Person other than a natural person, any other Person,
directly or indirectly, controlling, controlled by, or under common
control with, such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling," "controlled by" and `under common control with"), as
used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership
of voting securities, by contract or otherwise.
"Articles of Association" shall mean the Articles of Association
of the Joint Venture Company as may be amended from time to time by
the Shareholders.
"Assets" shall mean the personal and intangible property
currently used by Waldman and his Affiliates in the performance of
line cutting operations in Bolivia, all of which are listed in
Exhibits C, C-1 and C-2 to the Agreement, but specifically excluding
the property set forth on Exhibit C-3 to the Agreement.
"Board of Directors" shall mean the Board of Directors of the
Joint Venture Company as constituted from time to time in accordance
with the Agreement and the Articles of Association.
"Borrowed Servants' Agreement" shall mean the Borrowed Servants'
Agreement in the form attached as Exhibit "D" to the Agreement.
"Business Day" shall mean any day on which commercial banks are
open for business in both New Orleans, Louisiana, and Santa Cruz,
Bolivia.
"Closing" shall mean the consummation of the contributions of
capital, the transfers of Goodwill, Contracts, Property and Assets,
and the payment of cash and the delivery of OMNI Common Stock and
Shares on the Closing Date, all as contemplated to occur at such time
in Article IV hereof.
"Closing Date" shall mean the day on which the Closing occurs and
which shall be fixed by mutual agreement of the Parties as soon as
practicable following the due qualification of the Joint Venture
Company as a branch in Bolivia, the satisfaction of any other
regulatory requirements that are a prerequisite to conducting
Operations in Bolivia and the obtaining of all necessary Third Party
consents, if any, but in no event later than the 5th Business Day
following the date of satisfaction of such conditions, and subject to
the further condition that all representations and warranties set
forth in Article X of the Agreement are true and correct as of such
date.
"Confidential Information" shall mean all information of any
nature and in any form that at the time or times concerned is not
generally known to Persons engaged in business similar to that
conducted or contemplated by the Shareholders, the Joint Venture
Company or its Subsidiaries, including, without limitation, the
methods and procedures employed in submitting bids for and performing
line cutting, seismic drilling, survey, helicopter support and other
related services to the onshore geophysical industry and the assembly,
manufacturing and repair of drilling equipment for use by the onshore
geophysical industry.
"Contracts" shall mean any executory contracts to perform line
cutting or other services in the Territory for the geophysical
industry to which Waldman or one of his Affiliates is a party, a list
of which is attached as Exhibit E to the Agreement, which shall
include all revenue and income earned from, and all expenses incurred
in connection with, the conduct of Waldman's Business by Waldman and
his Affiliates since July 1, 1998.
"Employment Agreement" shall mean the Employment Agreement to be
entered into by and between Waldman and the Joint Venture Company,
which shall be in the form attached hereto as Exhibit "F".
"Goodwill" shall mean the goodwill of Waldman and Liderco, Ltda.
with respect to line cutting and other services, as such term is
defined by U.S. generally accepted accounting principles.
"JV Administration" means the accounting, record keeping, tax
reporting and other administrative support services necessary to
support and account for the Operations, including any treasury support
services, the right to establish and maintain bank accounts or other
accounts with financial institutions, making disbursements,
investments, foreign exchange dealings and receipt of remittances.
"Memorandum of Association" shall mean the Memorandum of
Association of the Joint Venture Company in the form attached as
Exhibit "H" to the Agreement, as may be amended from time to time by
the Shareholders of the Joint Venture Company.
"OMNI Common Stock" shall mean the shares of common stock, $0.01
par value per share, of OMNI.
"Person" shall mean and include natural persons, corporations,
partnerships, limited liability companies, joint stock companies,
limitadas, joint ventures, associations, trusts and other entities of
organizations, whether or not legal entities.
"Property" shall mean the certain piece of real property located
in Santa Cruz, Bolivia, more properly described in Exhibit B to the
Agreement and any and all improvements located thereon.
"Shareholders" shall mean the holders of Shares in the Joint
Venture Company, who shall initially be Waldman and OMNI
International.
"Shares" shall mean the then issued and outstanding shares in the
capital of the Joint Venture Company, each of which shall have a par
value of USD $1.00.
"Subsidiary" shall mean (a) any corporation, partnership, branch
or other Person created, acquired, managed or controlled by the Joint
Venture Company or (b) any corporation, partnership or other Person of
which 50% or more of the issued and outstanding securities (or other
equivalent interest) having by the terms thereof voting power under
ordinary circumstances for the election of directors or Persons
performing similar functions is owned or controlled, directly or
indirectly, by the Joint Venture Company or its Subsidiaries pursuant
to or for the purposes of the Agreement.
"Territory" shall mean and include the following countries
exclusively: Bolivia, Argentina, Peru, Brazil, Chile, Ecuador,
Venezuela, Columbia, Guyana, Suriname, French Guiana, Paraguay and
Uruguay.
"Third Party" shall mean any Person other than such Person and
its Affiliates.
"USD" shall mean United States Dollars.
A-1
OMNI ENERGY SERVICES CORP.
AND
ROBERT F. NASH
EMPLOYMENT AND NON-COMPETITION AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AND NON-COMPETITION AGREEMENT
(the "Agreement") is made and entered into on this 17th day of August 1998,
by and between OMNI ENERGY SERVICES CORP., a Louisiana corporation (the
"Company"), and ROBERT F. NASH, a resident of the State of Texas (the
"Employee").
WHEREAS, the Company desires to obtain the services of the Employee
upon the terms and conditions contained herein; and
WHEREAS, the Employee desires to provide his services to the Company
upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT The Company has agreed to hire Employee and the
Employee has agreed to be employed by the Company upon the terms and
conditions hereinafter set forth.
2. TERM. Subject to the provisions for termination as hereinafter
provided, the term of Employee's employment with the Company shall commence
on September 1, 1998 and shall expire on September 7, 1999, except that the
provisions of Paragraphs 8 and 9 of this Agreement shall survive the
termination of this Agreement for the periods set forth therein.
3. COMPENSATION. Subject to adjustment pursuant to Paragraph 5
hereof, the Company shall compensate the Employee as follows (which
compensation shall be in addition to any additional compensation otherwise
available to Employee pursuant to Paragraph 4 hereof):
(a) Base salary of One Hundred Fifty Thousand Dollars ($150,000)
per annum during the term of this Agreement.
(b) Guaranteed bonus of Seventy-five Thousand Dollars ($75,000)
per annum payable in equal monthly installments of $6,250 during the term
of this Agreement.
(c) Options to acquire 150,000 shares of common stock, $.01 par
value per share, of the Company (the "Common Stock"), which shall be
granted within three business days of September 1, 1998, shall have an
exercise price equal to the fair market value of such stock on the date of
grant, and shall be granted under the Stock Incentive Plan of the Company
and pursuant to that certain option agreement attached hereto as Exhibit
"A."
4. OTHER BENEFITS. Employee shall be entitled to participate in all
employee benefit plans or arrangements that the Company makes generally
available now or in the future to its executive officers, such as vacation,
sick leave, life insurance, health insurance, long-term disability
insurance, retirement and incentive bonus plans. Any payments or benefits
payable to Employee hereunder in respect of any calendar year during which
Employee is employed by the Company for less than the entire year shall,
unless otherwise provided in the applicable Benefit Plan, be prorated in
accordance with the number of days in such calendar year during which he is
so employed. To the extent consistent with each such Benefit Plan,
Employee's base salary shall be considered the base salary and guaranteed
bonus set forth in Sections 3(a) and (b) of this Agreement for purposes of
the Benefit Plans.
Employee shall be reimbursed all usual and customary out-of-pocket,
third party expenses of relocation to the Carencro-Lafayette, Louisiana
area in an amount up to $25,000 and shall be reimbursed for living expenses
in the Carencro-Lafayette area, including the costs of an apartment,
utilities and phone service; all upon presentation of documentation
sufficient for federal income tax purposes.
Employee shall be entitled in each year, at a time convenient to the
Company, to a vacation of four weeks on the same policies as applicable to
employees of the Company generally and during which his salary will be paid
in full.
5. CHIEF EXECUTIVE OFFICER AND ADDITIONAL BENEFITS. If on or before
August 31, 1999 Employee is named Chief Executive Officer by the Board of
Directors, Employee and the Company will enter into a new agreement, the
terms and conditions of which shall be identical to this Agreement, except
that (i) the term of such agreement shall be extended so as to expire on
the third anniversary of the effective date of the naming of Employee as
Chief Executive Officer (the "Promotion Date"), (ii) unless earlier
terminated, the term of such agreement will be automatically extended by
one year on each anniversary of the Promotion Date and (iii) Employee's
combined base salary and guaranteed bonus shall be increased to $300,000
per annum.
6. DUTIES. During the term of this Agreement, Employee shall serve
as Chief Operating Officer and Executive Vice President with powers,
authority and functions commensurate with such positions, shall report to
the Chairman and the Chief Executive Officer or Board of Directors, and
shall perform such duties, commensurate with such positions, as are
assigned to him by the Chairman and the Chief Executive Officer or Board of
Directors.
7. TERMINATION. This Agreement may be terminated at any time by the
Company, without prior notice, for cause or for breach of any obligation of
Employee to Company, in which case this Agreement shall terminate without
further obligation to the Company other than for obligations that have
accrued to the date of termination, which obligations shall be paid in a
lump sum in cash within 30 days of the date of termination. Upon
termination of this Agreement by the Company without cause or in the
absence of a breach of an obligation of Employee to the Company, the
Company shall pay to Employee, in addition to all amounts or compensation
to which he is entitled pursuant to the Company's termination policies and
plans then in effect, if any, as severance pay, an amount equal to the
greater of (i) the remaining base salary and guaranteed bonus pursuant to
Paragraphs 3(a) and (b) of this Agreement for the remainder of the term set
forth in Paragraph 2 hereof or (ii)$112,500 in one payment within 10
business days of such termination.
This Agreement may be terminated at any time by the Employee on four
weeks prior written notice, in which case this Agreement shall terminate
without further obligation to the Company other than for obligations that
have accrued to the date of termination, which obligations shall be paid in
a lump sum in cash within 30 days of the date of termination.
For purposes of this Agreement, the Company shall have "cause" for
termination of Employee's employment hereunder upon the occurrence of any
of the following: (i) the continued failure by Employee to substantially
perform his material duties hereunder according to objective written
standard(s) as provided from time to time by the Board of Directors
consistent with Employee's duties as set forth in Paragraph 6, and with
generally accepted industry standards for chief operating officers of
similar companies, after demand for substantial performance is delivered by
the Company to Employee in writing, which demand shall set forth the
objective standard(s) which the Company believes have not been met, and
after a reasonable period of time, not less than thirty (30) days, shall
have elapsed after said Notice during which Employee shall have an
opportunity to cure the alleged deficiency, (ii) the Employee's conviction
of a felony, (iii) any acts of dishonesty or deceit by the Employee
involving the Company's business or his performance of his duties
hereunder, or (iv) a material breach of any fiduciary duty of loyalty owed
to the Company by the Employee. Any act, or failure to act, by Employee
that is based upon authority given pursuant to instructions from the Chief
Executive Officer or pursuant to a resolution duly adopted by the Board or
based upon the advice of counsel for the Company shall not constitute
"cause" for termination of Employee's employment with the Company.
8. CONFIDENTIALITY AND NON-DISCLOSURE OF INFORMATION. Employee
agrees that the names of the Company's customers and its pricing structure,
processes, operations, marketing programs, sales techniques, designs,
specifications and other trade secrets which are not part of the public
domain and not reasonably discoverable except by virtue of employment with
the Company, (collectively referred to herein as "Proprietary Information")
are valuable, special and unique assets of the Company. Employee will not,
during the term of Employee's employment hereunder and for a period
expiring two (2) years after the termination of Employee's employment under
this Agreement (one (1) year if terminated without cause or absent a breach
of any obligation of Employee to the Company), directly or indirectly,
utilize for the benefit of any person, business, enterprise or entity other
than the Company or disclose any portion or part of the Company's
Proprietary Information to any person, firm, corporation, association or
other entity for any reason or purpose whatsoever. Furthermore, it is
agreed that all data, lists, papers, memoranda, documents, and all products
of Employee's skill, resulting from Employee's employment hereunder, shall
be and remain the sole and exclusive property of the Company, and Employee
shall execute any and all agreements and instruments that may be necessary
to evidence the Company's ownership of such property.
9. COVENANT OF NON-COMPETITION. For the period beginning on the
date hereof and expiring two (2) years after the termination of Employee's
employment under this Agreement (one (1) year if terminated without cause
or absent a breach of any obligation of Employee to the Company), (a)
Employee will not, directly or indirectly, within any parish or
municipality in Louisiana set forth on Exhibit "B" or in any county or
municipality of any other state or foreign jurisdiction in which customers
of the Company are located or reside, solicit, induce or otherwise contact
customers of the Company for the purpose of soliciting business from the
Company's customers, or any other purpose whatsoever which is detrimental
to the Company or its business; and (b) Employee will not, directly or
indirectly, within any parish or municipality in Louisiana set forth on
Exhibit "B" or in any other state or foreign jurisdiction in which the
Company engages in or has engaged in business, own, manage, operate,
control, be employed by, consult with, or participate in, any business,
enterprise, or entity (including a sole proprietorship of Employee) which
owns, operates or controls any geophysical services business, which
business includes but is not limited to the provision of seismic drilling,
seismic surveying, and services which are material and integral to those
businesses, including aviation operations. Notwithstanding the foregoing,
the Employee shall not be prohibited from owning not more than five percent
(5%) of the outstanding shares of capital stock of a publicly-held
corporation engaged in the business of the Company, which shares are listed
for trading on a national securities exchange.
10. REFORMATION/SAVINGS CLAUSE. The parties agree that if either the
length of time or the geographical area of Employee's covenants contained
herein are deemed too restrictive by any court of competent jurisdiction in
any proceeding involving the validity of said covenants, then the court may
reduce the offending restriction to the maximum restriction it deems
reasonable under the circumstances so as to give the maximum permissible
effect to the intentions of the parties as set forth herein, and the court
may enforce such provisions as so reformed.
11. REMEDIES AND EQUITABLE PROVISIONS. The following provisions
shall apply in respect of Employee's covenants and agreements contained in
this Agreement:
(a) Employee acknowledges and agrees that Employee's covenants
contained in this Agreement are reasonable and necessary for the proper
protection of the Company and that the Employee's agreements herein not to
compete with the Company shall not hinder Employee in obtaining gainful
employment at the termination of this Agreement in the event Employee shall
desire such employment.
(b) Employee acknowledges and agrees that the Company does not
have an adequate remedy at law for the breach or threatened breach of
Employee's covenants contained in this Agreement, and Employee therefore
agrees that the Company, in addition to any other remedy which may be
available to it, shall be entitled to enforce Employee's covenants by
injunction or other equitable means.
12. COMPANY INDEMNIFICATION. Company agrees to defend, indemnify and
hold harmless Employee from any demand, loss, cost or expense, including,
but not limited to attorney's fees, arising from or related to any claim by
any former employer of Employee based on any alleged breach of any
purported covenant of confidentiality and/or non-competition agreement.
13. NOTICES. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing, and if sent by certified
mail:
If to Employee: Robert F. Nash
20718 Castle Bend
Katy, TX 77450
If to Company: Omni Energy Services Corp.
4500 N.E. Evangeline Thruway
Carencro, LA 70520
14. WAIVER OF BREACH. The waiver or nonenforcement by the Company of
a breach of any provision of this Agreement by the Employee shall not
operate or be construed as a waiver of any subsequent breach by the
Employee.
15. ASSIGNMENT. Employee acknowledges that the services to be
rendered by him are unique and personal. Accordingly, Employee may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company.
16. SEVERABILITY. Every provision of this Agreement is entitled to
be severable. The parties agree that if any term or provision hereof is
held to be illegal, invalid, against public policy or unenforceable for any
reason whatsoever, such illegality or invalidity shall not affect the
validity of the remainder of the Agreement, and the remaining provisions
of this Agreement shall not be affected thereby.
17. AMENDMENTS. No alterations, modifications, amendments or changes
herein shall be effective or binding upon the parties unless the same shall
have been agreed in writing by all the parties.
18. PARAGRAPH HEADINGS. Paragraph and other headings in this
Agreement are for reference purposes only, and are in no way intended to
describe, interpret, define or limit the scope or extent of any provision
hereof.
19. COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts with the same effect as if all parties hereto had
signed the same document. All counterparts shall be construed together and
shall constitute one agreement.
20. APPLICABLE LAW. The Company and Employee acknowledge and agree
that the law of several states could, conceivably, apply to the terms of
this Agreement. In order to provide certainty with respect to the
construction, interpretation and enforcement of this Agreement, it is the
intention of the parties that the internal laws of the State of Louisiana
shall govern the construction, interpretation, validity and enforcement of
each term of this Agreement.
21. RIGHTS CUMULATIVE. The rights of the Company hereunder shall be
cumulative and the enforcement by Company of any right shall not affect in
any way the ability of the Company to enforce any other right hereunder or
any right or remedy of the Company at law or in equity.
22. ENTIRE AGREEMENT. This instrument contains the entire agreement
of the parties and may not be changed orally but only by agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and the Employee has hereunto set his hand as of the day and year
first above written.
COMPANY
OMNI ENERGY SERVICES CORP.
BY: /S/ DAVID A. JEANSONNE
________________________
DAVID A. JEANSONNE
Chairman of the Board
and Chief Executive Officer
EMPLOYEE
/s/ ROBERT F. NASH
_______________________
ROBERT F. NASH
<PAGE>
THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT is dated
and effective as of October 30, 1998 (the "Third Amendment"), among OMNI
ENERGY SERVICES CORP., a Louisiana corporation (the "Borrower"), American
Aviation L.L.C., a Missouri limited liability company ("Aviation"), Omni
Marine & Supply, Inc., a Louisiana corporation ("Marine"), Hamilton Drill
Tech Inc., an Alberta, Canada corporation ("Hamilton"), OMNI ENERGY
SERVICES-ALASKA, INC., an Alaska corporation ("Omni Alaska"), and HIBERNIA
NATIONAL BANK, a national banking association (the "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower, Aviation, Marine, and the Bank have heretofore
entered into an Amended and Restated Loan Agreement dated as of January 20,
1998, as amended by First Amendment thereto dated as of March 31, 1998, and
as amended by Second Amendment thereto dated as of July 31, 1998 (as so
amended, the "Loan Agreement"), pursuant to which the Bank established in
favor of the Borrower certain credit facilities consisting of Acquisition
Loans, Revolving Loans, and a Term Loan;
WHEREAS, subsequent to the execution of the Loan Agreement, Hamilton
and Omni Alaska became wholly-owned subsidiaries of the Borrower;
WHEREAS, the Loans by the Bank to the Borrower are guaranteed, in
solido, by Aviation, Marine, and Hamilton as the Guarantors;
WHEREAS, pursuant to this Third Amendment the Loans by the Bank to the
Borrower will be guaranteed, in solido, by Omni Alaska;
WHEREAS, the Borrower, with the consent of the Guarantors, has
requested that Lender extend a temporary non-revolving line of credit to
the Borrower, the proceeds of which will be used by the Borrower to finance
certain acquisitions by the Borrower and to finance an investment in a
foreign joint venture; and
WHEREAS, subject to the terms and conditions of the Loan Agreement, as
amended by this Third Amendment, the Bank is willing to extend a temporary
non-revolving line of credit to the Borrower.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants hereinafter set forth and intending to be legally bound hereby,
agree as follows:
1. DEFINED TERMS. Capitalized terms used herein which are defined
in the Loan Agreement are used herein with such defined meanings, except as
may be expressly set forth in this Third Amendment.
2. DEFINED TERMS REVISION.
(a) The definition of the term "Borrowing Base Amount" appearing
in Section 1.1 on page 3 of the Loan Agreement, as restated by the Second
Amendment thereto, is hereby deleted and restated as follows:
"BORROWING BASE AMOUNT" shall mean: (a) for the
Revolving Loan Commitment, at any time, based upon
the most recent timely submitted borrowing base
certificate submitted by or on behalf of the
Borrower (but not less than on a weekly basis), as
the same may be adjusted by the Bank on a daily
basis upon review of the Borrower's sales journals
and cash receipts and as a result of field
examinations of the Collateral (using reasonable
lending discretion), the lesser of (i)
$10,000,000.00 or (ii) the sum of (x) the amount
of Qualified Receivables at such time and (y)
advances, using reasonable lending discretion and
up to the sublimit (in the aggregate) of
$5,000,000.00, to finance the Borrower's
acquisition of Eligible Parts and Supplies, which
advances are limited to a loan to value ratio of
50%; (b) for the Acquisition Loan Commitment, the
lesser of (i) $9,000,000.00 or (ii) advances for
acquisitions of entities by the Borrower are
limited to an earnings multiple of less than or
equal to 5x projected EBITDA of the entity to be
acquired (based upon the Borrower's current
dayrates or contracts) and advances for capital
expenditures are limited to a loan to value ratio
of 75% for geophysical equipment and 80% for
aviation equipment. Further, for the Acquisition
Loan Commitment, advances to finance the purchase
of geophysical equipment are subject to a sublimit
(in the aggregate) of $4,000,000.00; or (c) for
the Bridge Line Commitment, (i) the lesser of
$6,639,200.00 or (ii) the sum of (x) advances to
the Borrower (or its wholly owned foreign
subsidiaries) for investment in any Bank approved
foreign joint venture shall be limited to a total
aggregate amount of $4,750,000.00, (y) advances
for acquisitions of entities by the Borrower are
limited to an earnings multiple of less than or
equal to 5x projected EBITDA of the entity to be
acquired (based upon the Borrower's current
dayrates or contracts), and (z) advances to
finance the purchase by the Borrower of the real
estate and improvements owned by David Jeansonne
(or an entity controlled by him) located at 4484
N.E. Evangeline Thruway, Carencro, Louisiana
70520, shall be limited to 80% of the current
appraised fair market value of said real estate
and improvements.
(b) The definition of the term "Commitments" appearing in
Section 1.1 on page 4 of the Loan Agreement is hereby deleted and restated
as follows:
"COMMITMENTS" shall mean, collectively, the
Revolving Loan Commitment, the Acquisition Loan
Commitment, the Term Loan Commitment, and the
Bridge Loan Commitment.
(c) The definition of the term "Guarantor" appearing in Section
1.1 on page 6 of the Loan Agreement, as restated by the Second Amendment
thereto, is hereby deleted and restated as follows:
"GUARANTOR" shall mean individually,
interchangeably, and collectively, Omni Marine &
Supply, Inc., a Louisiana corporation, and its
successors and assigns, American Aviation L.L.C.,
a Missouri limited liability company, and its
successors and assigns, and Hamilton Drill Tech
Inc., an Alberta corporation, and its successors
and assigns, Omni Energy Services Alaska, an
Alaska corporation, and its successors and
assigns, and any wholly-owned Subsidiary of
Borrower that the Borrower currently has or may
hereafter acquire.
(d) The definition of the term "Guaranty" appearing in Section
1.1 on page 6 of the Loan Agreement, as restated by the Second Amendment,
is hereby deleted and restated as follows:
"GUARANTY" shall mean, collectively, that certain
Commercial Guaranty dated January 20, 1998 by
Aviation in favor of the Bank, that certain
Commercial Guaranty dated January 20, 1998 by Omni
Marine in favor of the Bank, and that certain
Commercial Guaranty dated May 19, 1998 by Hamilton
in favor of the Bank, and that certain Commercial
Guaranty by Omni Alaska dated October 30, 1998 in
favor of the Bank.
(e) The definition of the term "Loans" appearing in Section 1.1
on page 7 of the Loan Agreement is hereby deleted and restated as follows:
"LOANS" shall mean, collectively, the Revolving
Loans, the Acquisition Loans, the Term Loan, and
the Bridge Loans.
(f) The definition of the term "Notes" appearing in Section 1.1
on page 8 of the Loan Agreement is hereby deleted and restated as follows:
"NOTES" shall mean, collectively, the Revolving
Note, the Acquisition Note, the Term Note, and the
Bridge Note, as each of them may be renewed or
extended, together with all other promissory note
or notes given in renewal, substitution, or as a
refinancing of any part of the indebtedness
evidenced thereby.
(g) The definition of "Request for Advance" appearing in Section
1.1 on page 9 of the Loan Agreement is hereby deleted and restated as
follows:
"REQUEST FOR ADVANCE" shall mean the Borrower's
request for an Acquisition Loan, a Revolving Loan,
or a Bridge Loan, as the case may be.
(h) The definition of the term "Security Agreements" appearing
in Section 1.1 on pages 9-10 of the Loan Agreement (as specifically amended
by the Second Amendment) is hereby deleted and restated as follows:
"SECURITY AGREEMENTS" shall mean (i) that certain
Commercial Security Agreement dated July 19, 1996,
by Omni Geophysical in favor of the Bank, as
amended by First Amendment thereto dated as of
June 13, 1997, by Second Amendment thereto dated
as of August 6, 1997, by Third Amendment thereto
dated as of September 30, 1997, by Fourth
Amendment thereto dated as of November 21, 1997,
and by Fifth Amendment thereto dated as of January
20, 1998, affecting all of the properties
described therein, (ii) that certain Security
Agreement (Fixtures) by Omni Geophysical dated as
of June 13, 1997 in favor of the Bank, as amended
by First Amendment thereto dated as of January 20,
1998, (iii) that certain Aircraft Security
Agreement by Aviation dated August 6, 1997 in
favor of the Bank, as amended by First Amendment
thereto dated as of December 29, 1997, and by
Second Amendment thereto dated as of January 20,
1998, (iv) that certain Commercial Security
Agreement dated August 6, 1997 by Aviation in
favor of the Bank, as amended by First Amendment
thereto dated as of January 20, 1998, (v) that
certain Commercial Security Agreement by the
Borrower in favor of the Bank dated as of January
20, 1998, (vi) that certain Commercial Security
Agreement by Omni Marine dated as of January 20,
1998 in favor of the Bank, (vii) that certain
Commercial Security Agreement by Hamilton dated as
of May 19, 1998 in favor of the Bank, (viii) that
certain Aircraft Security Agreement dated March
12, 1998 by the Borrower in favor of the Bank,
(ix) that certain Aircraft Security Agreement
dated June 4, 1998 by the Borrower in favor of the
Bank, (x) that certain Aircraft Security Agreement
dated June 29, 1998 by the Borrower in favor of
the Bank, (xi) that certain Aircraft Security
Agreement dated October 1, 1998 by the Borrower in
favor of the Bank, (xii) that certain Commercial
Security Agreement dated October 30, 1998 by Omni
Alaska in favor of the Bank, (xiii) all security
agreements granted prior to the date of the Third
Amendment by the Borrower, the Guarantors (or any
of them), and/or any other Person as security for
the Indebtedness, (xiv) all UCC-1 financing
statements, and related documents required by the
Bank in connection with any of the foregoing, (xv)
all amendments or modifications to any of the
foregoing, and (xvi) all additional security
agreements hereafter granted by any Person as
security for the Indebtedness, together with any
and all amendments or modifications to any of the
foregoing, including, if executed, the
documentation necessary to create the security
interests referred to in paragraph 9 of the Second
Amendment.
(i) The following definitions are hereby added to Section 1.1 of
the Loan Agreement:
"BRIDGE LINE COMMITMENT" means the agreement by
the Bank to the Borrower to make Bridge Loans in
accordance with the provisions of paragraph 3 of
the Third Amendment.
"BRIDGE LINE" shall have the meaning assigned to
that term in paragraph 3(a) of the Third
Amendment.
"BRIDGE NOTE" shall have the meaning assigned to
that term in paragraph 3(b) of the Third
Amendment.
"OMNI ALASKA" shall mean Omni Energy Services-
Alaska, Inc., an Alaska corporation, and its
successors and assigns.
"SECOND AMENDMENT" shall mean that certain Second
Amendment to Amended and Restated Loan Agreement
dated as of July 31, 1998 by and among the
Borrower, Aviation, Omni Marine, Hamilton, and the
Bank.
"THIRD AMENDMENT" shall mean that certain Third
Amendment to Amended and Restated Loan Agreement
dated as of October 30, 1998 by and among the
Borrower, Aviation, Omni Marine, Hamilton, Omni
Alaska, and the Bank.
3. THE BRIDGE LINE COMMITMENT. The Loan Agreement is hereby amended
and supplemented to include the following new provisions:
(a) BRIDGE LINE. Subject to the terms and conditions
of this Agreement, as amended by the Third
Amendment, the Bank agrees to make a temporary
non-revolving loan to the Borrower in a maximum
aggregate principal amount of $6,639,200.00 (the
"Bridge Line"); provided, however, (a) advances
under the Bridge Line Commitment are subject to
sublimits and loan availability limits, all as set
forth in the definition of Borrowing Base Amount
applicable to the Bridge Line Commitment, and
(b) that at no time shall the sum of the aggregate
principal amount of Bridge Loans to the Borrower
at such time outstanding exceed the Borrowing Base
Amount then in effect. In the event, at any time,
and from time to time, the sum of all outstanding
Bridge Loans issued and outstanding to the
Borrower exceeds the Borrowing Base Amount then in
effect, the Borrower shall repay the Bridge Loans
by such an amount to cause the sum of the Bridge
Loans outstanding to Borrower to equal the
Borrower Base Amount (or, at the option of the
Bank, the Borrower may post cash collateral to
secure such deficiency in the Borrower Base
Amount). Advances by the Bank under the Bridge
Line shall be used exclusively by the Borrower
(i) to finance any investment by the Borrower (or
its wholly-owned foreign subsidiaries) in any Bank
approved foreign joint venture, (ii) to finance
the Borrower's acquisition of 100% of the stock of
an entity or entities, and (iii) to finance the
Borrower's acquisition of certain real estate and
improvements from David Jeansonne (or an entity
controlled by him), which real estate and
improvements are located at 4484 N.E. Evangeline
Thruway, Carencro, Louisiana 70520; provided,
however, the availability of funds under the
Bridge Line to finance investments described in
clause (i) above shall be subject to a sublimit
(in the aggregate) of $4,750,000.00. The Bank
hereby agrees that the Borrower's capitalization
of Omni International and Omni International's
participation in Omni South America are Bank
approved foreign joint ventures. Notwithstanding
any provision in this Agreement, as amended by the
Third Amendment, to the contrary, it is agreed and
understood that any and all advances by the Bank
under the Bridge Line shall be subject to review
of all documentation requested by Bank and any
such advance shall be at the Bank's sole
discretion.
(b) Bridge Note. The indebtedness to the Bank under
the Bridge Line shall be evidenced by a promissory
note made by the Borrower (the "Bridge Note"),
dated of even date with the Third Amendment,
payable to the order of the Bank in the maximum
aggregate principal sum of $6,639,200.00, and
bearing interest at the LIBOR Rate plus the
Applicable Margin. The indebtedness of the
Borrower under the Bridge Note shall be payable as
follows: interest shall be payable quarterly and
at the maturity of the Bridge Note, as therein
provided; and principal and accrued unpaid
interest shall be due and payable 180 days from
the closing of the Bridge Line. Upon the
occurrence of an Event of Default or in the event
the indebtedness evidenced by the Bridge Note is
not paid in full on or before its maturity date,
then the Bank has the right prospectively to
adjust the interest rate under the Bridge Note
until it is paid in full as follows: the LIBOR
Rate plus the Applicable Margin plus additional
increases to the Applicable Margin calculated as
follows:
DAYS OUTSTANDING
181 - 210 days .50%
211 - 270 days .50%
271 - 330 days .50%
(c) Bridge Loans. For each requested Bridge Loan by
the Borrower, the Borrower shall provide the Bank
with a Request for Advance and all other
documentation requested by the Bank. The
procedures set forth in Section 3.2.2 of the
Agreement regarding manner and notice of borrowing
under the Acquisition Loan Commitment shall also
apply to the Bridge Line Commitment. In addition,
the provisions of Section 3.2.6 of the Agreement
pertaining to overlines and overadvances shall
also apply to the Bridge Line and the Bridge Note,
it being understood however, that $6,639,200.00 is
the maximum possible Borrowing Base Amount for the
Bridge Line Commitment.
(d) Conditions Precedent for Bridge Loans. The
conditional obligation of the Bank to make a
Bridge Loan shall be subject to the satisfaction
and continued satisfaction, in the Bank's sole
discretion, of the following conditions precedent:
(i) The conditions precedent specified in Section
9.1 of this Agreement;
(ii) The Borrower and the Guarantors shall have
executed the Third Amendment, and the
Borrower shall have executed the Bridge Note;
(iii) For a Bridge Loan pertaining to the
Borrower's investment in Omni International
and/or Omni International's investment in
Omni South America, the Bank's receipt of the
opening balance sheet of the Bolivian joint
venture detailed in the June 12, 1998 letter
of intent endorsed by Edwin Waldman Attie and
Roger Thomas;
(iv) The Bank's receipt of acceptable evidence
that any acquisitions, mergers or joint
ventures relating to the underlying Bridge
Loan have occurred (or will occur
contemporaneously with the funding of such
Bridge Loan);
(v) The Bank's satisfaction that the financing
complies with all applicable laws and
regulations and contractual obligations
deemed appropriate by the Bank;
(vi) The corporate, capital, legal, and
organizational documents of the Borrower
shall be satisfactory to the Bank;
(vii) For a Bridge Loan pertaining to the
Borrower's investment in Omni International
and/or Omni International's investment in
Omni South America, the Bank's receipt of the
first priority security interest and opinion
letter described in paragraph (9) of the
Second Amendment, in form and substance
satisfactory to the Bank and its counsel;
(viii) For a Bridge Loan pertaining to the
Borrower's investment in Omni International
and/or Omni International's investment in
Omni South America, deliver to the Bank a
photocopy of the signed joint venture
agreement;
(ix) For a Bridge Loan pertaining to the
Borrower's investment in Omni International
and Omni International's investment in Omni
South America, deliver reasonably
satisfactory evidence to the Bank that Omni
International, Omni South America, and the
Bolivian joint venture referenced in (d)(iii)
above are adequately insured with insurance
companies in such amounts and against such
risks as is usually carried by owners of
similar businesses and properties;
(x) For a Bridge Loan pertaining to the
Borrower's purchase of the real estate and
improvements located at 4484 N.E.Evangeline
Thruway, Carencro, Louisiana, the Borrower
will comply with all normal and customary
real estate requirements of the Bank,
including a current appraisal, all at
Borrower's expense;
(xi) For a Bridge Loan pertaining to acquisitions,
the Borrower agrees to provide Bank a first
priority security interest on all assets
acquired by Borrower with proceeds from the
Bridge Loan and/or for stock acquisitions, a
first priority security interest on all
assets of the new Subsidiary; and
(xii) The execution and delivery to Bank of the
Guaranty by Omni Alaska and the Commercial
Security Agreement dated October 30, 1998
(and the related financing statement), by
Omni Alaska in favor of the Bank.
(e) Fees. The nonrefundable commitment fee payable by
the Borrower to the Bank for the Bridge Line
Commitment shall be 1% of $6,639,200.00 payable by
the Borrower on or before its execution of the
Third Amendment. In addition, the Borrower shall
pay to the Bank a fee equal to 0.38% per annum on
the unused portion of the Bridge Line Commitment,
payable quarterly in arrears, commencing on
January 30, 1999.
4. Confirmation of Collateral Documents. All of the liens,
privileges, priorities and equities existing and to exist under and in
accordance with the terms of the Collateral Documents are hereby renewed,
extended and carried forward as security for all of the Loans and all other
debts, obligations and liabilities of the Borrower to the Bank, including
any and all Bridge Loans. The parties acknowledge that the Loans are
guaranteed in solido, by Omni Alaska pursuant to that certain Commercial
Guaranty dated October 30, 1998. In addition, the parties acknowledge that
the Loans are secured by that certain Commercial Security Agreement dated
October 30, 1998 by Omni Alaska. Further, the Guarantors hereby confirm
their solidary liability for all Loans, including any and all Bridge Loans.
In addition, pursuant to the Security Agreements, the Borrower and the
Guarantors agree and acknowledge that any Bridge Loan by the Bank to the
Borrower shall be secured by the Collateral Documents. Further, each of
the Guarantors does hereby acknowledge and agree that its obligations under
its Guaranty includes the indebtedness of the Borrower under the Bridge
Line as evidenced by the Bridge Note.
5. Revision to Article XI of the Loan Agreement.
Addition of Section 11.20. The Loan Agreement is hereby amended
and supplemented to include the following new affirmative covenants as
Sections 11.20 and 11.21:
Section 11.20. Foreign Ventures. The Borrower
agrees that its equity interest and/or the equity
interest of any Subsidiary and/or Omni
International in any foreign venture shall be not
less than 80%. In addition, the Borrower agrees
that either the Borrower or a Subsidiary of the
Borrower shall have voting control of the board of
directors of any entity formed by the Borrower or
its Subsidiary to participate in a Bank approved
foreign joint venture.
Section 11.21. Bolivian Joint Venture. The
Borrower agrees that all accounts receivable paid
to the Bolivian joint venture participated in by
Omni South America shall be paid in U.S. currency
and that the customers of the said joint venture
shall be publicly traded, rated entities and other
customers acceptable to the Bank.
6. Revision to Article XII of the Loan Agreement.
Revision to Section 12.6(g). Section 12.6(g) of the Loan
Agreement, which was added by the Second Amendment thereto, is hereby
deleted and restated as follows:
(g) Cash investment in Omni International and/or
in any Bank approved foreign joint venture in
an amount not to exceed $4,750,000 (in the
aggregate). In addition, the total
investment (cash, stock, equipment) in any
Bank approved foreign joint venture shall not
exceed $7,000,000.00 (in the aggregate).
7. Funding of Bank Approved Foreign Joint Ventures. The Borrower
and the Guarantors agree and understand that to the extent any of the
Bank's Commitments allow Loans for investment in foreign joint ventures,
including any capitalization by the Borrower of Omni International, that
the total aggregate amount of all such Loans by the Bank shall not exceed
$4,750,000.00, notwithstanding any provision in the Loan Agreement to the
contrary.
8. Representation: No Default. On and as of the effective date
hereof, and after giving effect to this Third Amendment, the Borrower and
the Guarantors confirm, reaffirm and restate the representations and
warranties set forth in the Loan Agreement and the Collateral Documents;
provided, that each reference to the Loan Agreement herein shall be deemed
to include the Loan Agreement as amended by this Third Amendment. The
Borrower and the Guarantors also represent and warrant that no Default or
Event of Default has occurred and is continuing under the Loan Agreement.
9. Payment of Expenses. The Borrower agrees to pay or reimburse the
Bank for all legal fees and expenses of counsel to the Bank in connection
with the transactions contemplated by this Third Amendment.
10. Waiver of Defenses. In consideration of the Bank's execution of
this Third Amendment, the Borrower and the Guarantors do hereby irrevocably
waive any and all claims and/or defenses to payment on any indebtedness
owed by any of them to the Bank that may exist as of the date of execution
of this Third Amendment.
11. Amendments. THE LOAN AGREEMENT AND THIS THIRD AMENDMENT ARE
CREDIT OR LOAN AGREEMENTS AS DESCRIBED IN LA. R.S. 6:<section>1121, ET SEQ.
THERE ARE NO ORAL AGREEMENTS BETWEEN THE BANK, THE BORROWER, MARINE,
AVIATION, AND HAMILTON. THE LOAN AGREEMENT, AS AMENDED BY THIS THIRD
AMENDMENT, SETS FORTH THE ENTIRE AGREEMENT OF THE PARTIES WITH RESPECT TO
THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR WRITTEN AND ORAL
UNDERSTANDINGS BETWEEN THE BORROWER, AVIATION, MARINE, HAMILTON AND THE
BANK, WITH RESPECT TO THE MATTERS HEREIN SET FORTH. THE LOAN AGREEMENT, AS
AMENDED BY THIS THIRD AMENDMENT, MAY NOT BE MODIFIED OR AMENDED EXCEPT BY A
WRITING SIGNED AND DELIVERED BY THE BORROWER, AVIATION, MARINE, OMNI
ALASKA, HAMILTON AND THE BANK.
12. Governing Law: Counterparts. This Third Amendment shall be
governed by and construed in accordance with the laws of the State of
Louisiana. This Third Amendment may be executed in any number of
counterparts, all of which counterparts, when taken together, shall
constitute one and the same instrument.
13. Continued Effect. Except as expressly modified herein, the Loan
Agreement shall continue in full force and effect. The Loan Agreement as
amended herein is hereby ratified and confirmed by the parties hereto.
[The remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to be executed and delivered as of the date hereinabove provided
by the authorized officers each hereunto duly authorized.
OMNI ENERGY SERVICES CORP.
By: /s/ JOHN H. UNTEREKER
------------------------
John H. Untereker
AMERICAN AVIATION L.L.C.
By: Omni Energy Services Corp.,
as Sole Member
By: /s/ JOHN H. UNTEREKER
------------------------
John H. Untereker
OMNI MARINE & SUPPLY, INC.
By: /s/ ALLEN WOODARD
---------------------
Allen Woodward
HAMILTON DRILL TECH INC.
By: /s/ ROGER E. THOMAS
---------------------
Roger E. Thomas
OMNI ENERGY SERVICES- ALASKA, Inc.
By: /s/ ROGER E. THOMAS
-----------------------
Roger E. Thomas
HIBERNIA NATIONAL BANK
By: /s/ TAMMY M. ANGELETY
___________________________________
Name: Tammy M. Angelety
Title: Assistant Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This statement contains summary financial information from consolidated
financial statements for the third quarter ended March 31, 1998, filed on form
10-Q and is lifted in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,324
<SECURITIES> 0
<RECEIVABLES> 19,415
<ALLOWANCES> 1,068
<INVENTORY> 7,382
<CURRENT-ASSETS> 30,762
<PP&E> 53,538
<DEPRECIATION> 5,467
<TOTAL-ASSETS> 94,885
<CURRENT-LIABILITIES> 16,755
<BONDS> 0
0
570
<COMMON> 159
<OTHER-SE> 49,259
<TOTAL-LIABILITY-AND-EQUITY> 94,885
<SALES> 19,905
<TOTAL-REVENUES> 19,905
<CGS> 17,016
<TOTAL-COSTS> 24,773
<OTHER-EXPENSES> 81
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</TABLE>
